ASIC’s warning to APRA-regulated funds about potential misleading statements to new and existing members demonstrates these institutions need to stay between the regulatory goalposts, says SMSF Association Chief Executive Officer/Managing Director, Andrea Slattery.
“This is a timely warning from the regulator. New members of some funds are being given the impression that they need to roll over existing superannuation to become members.
“It is not only misleading but also deceptive as members may have insured benefits or investment options in other funds that might not be available if they roll over to an APRA fund.
“Investment options also may be more restricted and some investment strategies unavailable.”
Slattery was commenting on ASIC’s overview of compliance issues that drew deputy chairman, Peter Kell, to remind APRA superannuation trustees that they should be mindful of the financial services laws and ensure that any of their communications to new or existing members were not “misleading or deceptive”.
She says many APRA funds now provide direct investment options with high concentrations in particular investment classes, brining into question the lack of diversification of members’ investment portfolios.
“This is something SMSFs are continually criticised for failing to have and is a fallacy with the vast majority of SMSFs.
“What’s interesting is that these direct investment options are being likened to an SMSF – an erroneous and misleading comparison. Self-Managed Superannuation Fund (SMSF) is a defined term in the law and no-one is able to mislead consumers into thinking they are getting something similar in another option.
“The fact is these direct investment options in the APRA funds typically don’t have the range of investment choice or the flexibility of an SMSF. A duck is not a chicken, and an APRA fund is not an SMSF, no matter how it is dressed up. It is either an SMSF or it is not.
“Moreover, the anecdotal evidence suggests that the take-up of these direct investment options is slow, a hardly surprising outcome when performance has shown to be below the same funds’ standard investment options and fees can significantly erode balances.”
Slattery says everybody should get advice from a qualified SMSF professional or financial advisor to ensure their rights and entitlements in their current funds are not reduced or eliminated if they decide to move funds.
“They should also consider a number of options to ensure they move to the fund that suits them best, not just the first one they come to or the one with the best advertising campaign.”
