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Did self-interest motivate Cooper on SMSFs?
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| Jeremy Cooper
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An analysis of the Cooper Review final report recommendations by actuarial firm Rice Warner has suggested that its light-handed approach to self-managed superannuation funds (SMSFs) was owed to the fact that a number of the Cooper Review panel members, including the chairman, Jeremy Cooper, control SMSFs in their own right.
The analysis, published this week, suggested that in taking this "light handed" approach, the panel overlooked the fact that many SMSFs are sub-scale and have undiversified investment portfolios.
Elsewhere in the analysis, Rice Warner also suggested that the Cooper Review has over-estimated the savings that can be achieved from implementing its recommendations and suggested that the central element of the report, MySuper, was “over-engineered and costly”.
“The light treatment of the SMSF segment is incongruous given the heavy-handed approach to APRA-approved funds,” the Rice Warner analysis said. “While the review is obsessed with ensuring that members are provided with good value, they appear to have reasoned that people setting up a SMSF are capable of taking care of their own arrangements and need little protection.”
However, it added, “yet, we know that at least one-third of SMSF funds are sub-scale and most members have undiversified investment portfolios — with no requirement to seek advice or provide a formal structured investment strategy”.
The analysis went on to point out that for several years, there had been concern within the industry that many Australians were attracted to setting up a SMSF “even where it is not the optimum outcome for their superannuation”.
“Whilst the review has recommended training for trustees, the continued lack of integration with APRA rules will create an arbitrage opportunity for institutions and intermediaries to promote SMSF structures for those members with the most at stake — those with high balances,” it said.
Rice Warner is recommending that before the Government moves to implement any of the Cooper Review recommendations it consult widely with the industry.
AUTHOR
Mike Taylor
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