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GESB urges Australians to get SMSF advice
GESB is urging Australians to seek advice to ensure self managed super funds (SMSFs) are suitable for their circumstances after national research demonstrated that many Australians don’t understand the time, risks and costs involved in operating an SMSF.
More than half of Australians thought it was appropriate to establish a SMSF with a balance of $50,000 or under, and one quarter thought a balance of $5,000 would be appropriate, according to a national survey of 1100 people conducted by TNS on behalf of GESB in March 2010.
SMSFs with $50,000 or less in assets would have average annual operating expenses of 5 to 6 per cent of their total assets, while a $5,000 balance would be eaten up in the first year of operation, according to Cooper Review findings quoted by GESB.
The growth in SMSFs suggested Australians wanted to exercise more control over their super, or felt that account fees charged by the major super providers were too high, according to general manager of wealth management at GESB Fabian Ross.
“Access to the information required to manage super does not equate to having the ability to interpret or apply this information in an effective and efficient way to ensure an adequate income in retirement,” Ross said.
“Our research shows that only a third of people would consult a professional financial adviser to decide how suitable an SMSF is for their individual circumstances. People need to understand that the control they are seeking could come at the price of greater risk, cost and personal commitment.”
There appeared to be a perception among Australians that they can deliver better returns than a full time super fund investment team, although this was unlikely unless the individual was taking on significantly more risk or getting lucky, Ross said.
While Australians appeared to have a good grasp of some of the technical risks associated with SMSFs, many failed to appreciate the obligations of trustees or so-called ‘lifestyle’ risks, the research showed.
Individuals needed to take into account factors such as the time and money associated with administering a SMSF, and whether they would have the desire and ability to manage the fund in the long term, according to GESB.
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