While most advisers see SMSF advice and administration as a good way to demonstrate their value to clients, adviser Nick Bruining likens them to getting a bad tattoo.

“Both have been popular in the last decade, and at the time they seemed like a good idea,” Bruining says. “Now, 10 years later on, many are regretting them.”

Bruining – a former director of the Financial Planning Association – is the founding principal at Perth advisory firm Bruining Partners. He says the firm has “two or three legacy SMSFs” on its books but does not encourage their adoption due to a basic belief that they are more trouble than they’re worth.

“In many cases the complexities are not adequately explained to the client and it often relies on one individual being the ‘lead’ trustee,” Bruining says. “When that person can’t act, we often see the remaining trustee(s) paying a fortune in costs”.

While SMSFs can deepen the client relationship and make them more ‘sticky’, Bruining believes this is the wrong approach. Take this out of the equation, he explains, and self-managed superannuation funds become a lot less attractive.

“If you view the super-fund – whatever form it takes – as simply a tool in the planner’s tool-kit rather than a product to be sold, you soon realise what’s in the best interests for the client,” he says.

Running an SMSF as an adviser, he believes, is a problematic endeavour.

“I might be wrong, but I see it as one of my professional responsibilities to separate advice from the product. If we are the product (as in running the SMSF or managed account) then it is inherently conflicted and, in my view, not in the client’s best interest anyway. If they can’t easily break the connection, then it reinforces the conflict,” he says.

Push and pull

Bruining’s assertion comes just a few months after ASIC released a fact sheet emphasising the risks involved in SMSFs, particularly those with small balances. The fact sheet was widely criticised for using scare tactics and flawed data.

“We certainly are disappointed with the tone,” said SMSF Association CEO John Maroney. “It casts SMSFs in a poor light and we think it lacks balance.”

The fact sheet, which was sent out to all new SMSF members in November as part of a trial, estimated that it takes over 100 hours a year to run – a figure that was derided by industry experts.

“With data feeds and email making collation and exchange of information so easy these days I think this figure is at least 40-60 per cent over estimated,” said Liam Shorte, director at Verante Financial Planning.

ASIC also said the average cost of running an SMSF is $13,900 per year, which Maroney refuted.