Reflecting on the tsunami of issues about to engulf accountants and SMSF holders, industry consultant John Wiseman points to the impact it will have on costs and fees – one of the key motivators for setting up and maintaining an SMSF. For those trustees and members, fees and charges are going to be a major and unexpected issue in the post July 1, 2016 era.
Just look at the numbers challenges John Wiseman. “At December 2015 SMSF accounted for nearly 30% of the $2 trillion held in assets in the superannuation accounts of approximately 550,000 members. Over recent years, the industry has seen thousands of new SMSF accounts added every quarter as individuals seek to manage and control their retirement savings/investment journey and destination”.
Apart from the fanciful notion of DIY amateur control, the other significant motivator has been fees and charges said John Wiseman. “Capitalising on this ‘I can do it myself’ attitude and belief has been the number of discounters that seem to be growing in greater numbers daily with advertisements offering inexpensive over the phone or online solutions for trustees and members”.
“I can only see an ocean of trouble for those that have elected the cheap offering over professional qualified advice that is provided by specialist financial planners”.
SMSF discounters may on the surface appear to be a cost effective answer to the burning priority of fees for trustees and members – however there is absolutely no substitute for quality for anyone acting as the trustee for one of the two largest and most important assets of an individual’s life.
John Wiseman’s strongly suggests to anyone acting as a trustee to seriously treat their responsibility with the importance and respect it deserves to ensure the long term protection of the SMSF and the financial futures and wellbeing of the members.
Further evidence that reducing fees is a key motivator is evidenced by the huge number of individual trustees that are still operating as opposed to the corporate trustee that many experts have criticised at industry forums and events such as the SMSF Association conference in Adelaide last month.
Most SMSFs should have a corporate trust deed even though on the surface the individual trust deed may appear to be the cost effective alternative said John Wiseman. Pointing to the exemplary approach of a presenter and industry role model practitioner at a recent seminar that said his planning practice would not contemplate any SMSF unless there was a corporate trust deed.
As the July 1 SMSF exemption deadline looms on the horizon, those accountants who are not addressing this issue as a priority now are going to make it more difficult later for their clients said John Wiseman.
“For those accountants that are avoiding the issue as it’s too hard and do not have a plan / strategy to address these issues for their SMSF clients face potential financial loss through devaluation of their business. I would not be surprised to see prospective buyer’s walk away following a due diligence assessment and identification of this situation”.
But the tsunami of problems doesn’t end here for accountants and SMSF holders as another extremely disturbing wave approaches.
There has been a huge increase in the number of individuals that have been disqualified from acting as a trustee of an SMSF or as a director of the funds corporate trustee. At the end of June 2015 the ATO disqualified 663 individuals, an increase of 13% over the previous year – and a doubling of the number from 2010-11.
Not a great scenario for someone to have the ATO say that they are not a fit and proper person to be a trustee or a responsible officer of a body corporate that is a trustee etc.
While time is on their side, astute accountants, trustees / members have already abandoned their DIY habits and sought the services or an outsourced facility with a specialist SMSF financial planner. They have also accepted that there will be an increase in costs associated with the services of a qualified expert and professional.
However, as July 1 nears, two very disturbing scenarios are emerging as witnessed by the extraordinarily low number of accountants that have applied for their AFSL (just over 200 at November 2015 according to ASIC). Firstly, there is a strong indication that many accountants are in denial and plan to continue (at their immense professional and business peril) to provide unlicensed SMSF advice post July 1.
The other will be a last minute rush to the premises financial planners crying out for help as accountants realise the enormity of the administrative and compliant demands that the provision of proper financial advice requires.
John Wiseman concluded, “The era of the amateur DIY SMSF is rapidly coming to a close as the sheer size of SMSFs as a percentage of Australia’s pool of retirement savings demanded a professional approach to the provision of advice and related services.
“The winners in the new era will be specialist financial planners and professional accounting practices that have reengineered their businesses and service offerings. But in the end, the real winners will be the Australian consumers and national economy”.
Source: John Wiseman Consulting
