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SMSFs – a challenge and an opportunity
Many industry fund executives remain deeply suspicious of the reasons behind the rise and rise of SMSFs, but their focus might be better directed towards better understanding their members and their changing expectations.
When the Australian Securities and Investments Commission (ASIC) early this year issued a media release announcing that industry fund Media Super Limited had paid a $10,200 penalty related to producing “potentially misleading advertisements”, it also raised a number of important issues.
The first of those issues is the continuing disquiet that many industry funds feel about the rise and rise of self-managed superannuation funds (SMSFs). The second of those issues is ASIC’s handling of the alleged Media Super breach.
The board of Media Super might well ask itself why ASIC would choose to issue a media release about the $10,200 penalty in January, 2014 when the actual infringement notice was issued in September, 2013, and the allegedly misleading material was published by the super fund in 2012.
There are those who might cynically reflect that the issuing of any media release on 6 January was bound to gain maximum attention from journalists fresh back from their Christmas/New Year break.
Those same cynics might also reflect that ASIC is currently the subject of scrutiny by a Parliamentary Committee and that a Coalition Government now sits on the Treasury benches in Canberra.
Of course, at the centre of the Media Super infringement penalty was ASIC’s assessment that the fund had published advertisements as a fact sheet in September, 2012, which compared the costs and benefits of SMSFs with the costs associated with being a member of Media Super.
According to the ASIC media release, “ASIC was concerned that the fact sheet inaccurately represented the costs and benefits of the Media Super funds compared to self-managed super funds”.
It then quoted ASIC Commissioner, Greg Tanzer as saying, “ASIC is serious about making sure investors can be confident and informed and that means cracking down on misleading or inaccurate advertising” while acknowledging the fund had acted quickly to remove the statements from its website and had fully cooperated with the regulator.
It has generally been no secret in the superannuation industry that Media Super is amongst those funds which has taken a bigger than normal hit from the establishment of SMSFs and that its chairman, Gerard Noonan, has been vocal in expressing his concerns about the manner in which SMSFs are being marketed to fund members.
The reality for Media Super has been that Australia’s daily newspaper industry has being experiencing a period of rapid change and consolidation which has seen the departure of large numbers of journalists and other fund members who have also been the recipients of significant redundancy packages.
The harsh reality for Media Super, as it has been for some other superannuation funds, is that when members aged over 45 are made redundant and receive substantial packages they seek advice. Very often that advice gives rise to the establishment of self-managed funds.
Further, while the account balances of those fund members may appear comparatively modest prior to being redundant, the addition of their severance package can take the quantum well into the sweet spot for the establishment of an SMSF – arguably close to $500,000.
So the challenge for Media Super and other similar funds is not to just talk about the comparative costs of industry funds and SMSFs but, rather, to offer those members something which more effectively suits their circumstances and will therefore prove more attractive than an SMSF.
Media Super’s Noonan is right to be concerned about members who are being lured into the establishment of SMSFs without sufficiently robust account balances, but he is wrong to presume that all departures are based on inappropriate advice or mis-selling.
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