The corporate watchdog is taking on online property spruikers who target people running self-managed superannuation funds.
A report released by the Australian Securities and Investments Commission on Thursday morning says most advice given to SMSFs is “adequate” but warned of “concerning pockets of poor advice”.
“In the right hands, SMSFs can be very effective retirement savings vehicles,” ASIC says. “In the wrong hands, however, SMSFs can be high-risk.”
Most of the poor pockets of advice identified by the regulator related to recommendations that investors start a DIY fund and borrow to invest in real estate inside the fund.
The restrictions around borrowing to invest in real estate through a SMSF have been relaxed in recent years. That has seen the emergence of property spruikers on the internet touting the tax advantages of holding property inside superannuation’s low tax environment.
“We do not want to see SMSFs become the vehicle of choice for property spruikers. Where we see examples of unlicensed SMSF advice, or misleading marketing, we will be taking regulatory action,” ASIC Commissioner Peter Kell
The regulator reviewed the files of accountants, financial planners and others, such as specialist superannuation administrators, that advise on DIY funds, to better assess the risks in the DIY funds sector.
ASIC reviewed 100 investor files relating to the establishment of an SMSF. The files were not selected randomly. Most of the DIY funds had a fund balance of less than $150,000. Industry professionals often cite $300,000 as being the minimum needed to make the costs of running a DIY fund worthwhile.
“ASIC has ramped up its attention on a sector that is of growing importance to more Australian investors. We want to help ensure that we have a healthy SMSF sector,” Mr Kell said.
The regulator says SMSFs are best suited to investors with financial experience. It says DIY funds are reasonably complex to run and require a hands-on approach and may be more expensive than large superannuation funds.
The median size of superannuation assets recommended as the minimum needed to start a DIY fund was $300,000. However, at least one adviser recommended a minimum balance of $10,000.