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Coercive control in SMSF becoming a hot issue AFCA is anticipating there will be more focus on coercive control and elder abuse going forward.. Alexandra Sidoti, senior ombudsman with the Australian Financial Complaints Authority, said it is “a bit of a funny space around these” because sometimes it is not clear to see the conduct or it is difficult to ascertain. “So sometimes, this will be around the periphery of AFCA complaints, but not the core focus of a complaint,” Sidoti said. “In the same way, though, that SMSFs can be a vehicle for businesses just wanting to get you into their related party product, likewise, if there are family members or people in your immediate circle who have malintent and want to get their hands on somebody’s superannuation, then getting them into an SMSF is going to be a good way to do that.” Sidoti said advisers should be mindful of this as it is an issue of which the sector needs to be more “alive to” than it has been in the past. She continued that one of the other issues around which AFCA is receiving increasing complaints is looking at the cost-effectiveness of an SMSF. “Most people know that SMSFs tend to have more fixed costs, whereas APRA-regulated funds have more proportionate costs, so if you have a very big superannuation balance, an SMSF will generally be cheaper,” she explained. “If you’ve got a very low superannuation balance, the cost effectiveness is going to be a bit different, and it might be a bit more challenging. Sometimes we see this cost comparison done but not done well. We often see statements of advice that appear to do a comparison between an APRA-regulated fund and the cost of the SMSF, but leave out a lot of the SMSF costs, including, for example, the greater need for ongoing professional advice.” She continued that people may not need to get annual advice when they have a set-and-forget kind of investment in an APRA-regulated fund, but if they move into the SMSF space, depending on the underlying investments chosen, there is going to be a greater need for ongoing advice. “It really does need to be factored in depending on what those underlying investment recommendations are. We’re seeing that done a bit more, but not necessarily done well,” she said. “I’ve seen at least one complaint where the client was already living overseas at the time, they were back in Australia briefly and were recommended an SMSF. It really speaks to how technical this space is that sometimes advisers in the area aren’t necessarily across all of the aspects, I would suggest this is probably an adviser who’s not really specialist in the area that was involved in that occasion. Certainly, we’re concerned about the numbers of people we’re hearing about who are going into SMSFs without getting any advice at all.” She said SMSFs are an area where AFCA advocates for having specialist advice, both at setup and ongoing. “The other thing we’re not seeing done well at all is the question of what it is that people want an SMSF for. Often we see either the clients ask for an SMSF, therefore we’re recommending an SMSF and doesn’t actually meet the safe harbour provisions at all,” she said. “You do still need to go through and think about an SMSF in those circumstances and what the strategy may be. Advisers need to understand what a client is wanting to achieve with an SMSF and whether that structure will actually achieve it. That remains an adviser’s responsibility to take a client through.”
Keeli Cambourne
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