Message to SMSFs – we love you just the way you are

Editorial director of Switzer
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SMSFs have found a friend in the current government and Assistant Treasurer, Arthur Sinodinos.

On the same day the government released a discussion paper that could severely change the way many large industry superannuation funds are governed, the Assistant Treasurer stressed that, philosophically, this government liked people taking responsibility for their own savings.

He acknowledged that the SMSF regulatory regime was more light touch than that which governed the larger superannuation funds i.e. APRA.

“I prefer them to keep a fairly flexible regime, as long as they understand that taking responsibility for your own savings means taking responsibility for your own savings,” Senator Sinodinos said in a question and answer session at a Financial Services Council and AMP breakfast.

He also dismissed concerns that borrowing to invest in property by SMSFs was building a property bubble.

“The challenge there is a lot of the people in this space tend to go with the areas they are most familiar,” he said.

However, over time, if you keep raising the level of financial literacy, he stressed, people will understand the importance of diversifying their assets.

Governance changes

Sinodinos says the governance changes announced today in the ‘Better regulation and governance, enhanced transparency and improved competition in superannuation’ discussion paper cover are designed to bring stability back to the superannuation system.

The main issue that will create angst for, particularly, the industry superannuation funds, is the composition of superannuation trustee boards.

For industry funds these boards currently require equal numbers of member representatives and employer representatives. It looks like they will now require independent directors as well.

“The government believes that having appropriate provision of independent directors on superannuation trustee boards is a vital step towards strengthening the superannuation system,” the paper says.

The paper wants to canvass what the definition of an independent director should be and what a superannuation trustee board should look like.

Sinodinos said the suggestions were not based on philosophy but were designed to bring superannuation funds more in line with corporate governance standards of companies.

“This is not ideological, the principles we are basing this on are the principles of transparency,” he told attendees at the breakfast.

The paper is open for discussion until February 2014.

FOFA reforms

The Assistant Treasurer also confirmed this morning that the Future of Financial Advice reforms for the financial planning industry are likely to be rolled back by this government.

The FOFA reforms were introduced to reduce some of the conflicts in financial advice remuneration systems that could encourage planners to recommend products based on their remuneration, rather than client need.

“What we were concerned about with FOFA was there was too much regulation in the changes Labor made,” Sinodinos said.

Those concerns relate to making financial advice inaccessible to many.

“We want to reduce the cost of providing advice,” he said.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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