'Dubious' financial advice leaves investors short changed

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“Dubious advice” is being handed out by some financial advisers who are seeking to capitalise on the SMSF market by allowing their clients to create an SMSF with as little as a $250,000 investment, according to a Sydney law firm.

Owen Hodge Lawyers contends that investors need a minimum of $500,000 in either their super fund or available through equity in shares or property to make the creation of an SMSF worthwhile.

However, some investors are being coerced into creating a SMSF with as little as $250,000 to invest thanks to dubious advice handed out by their accountant or planner, costing them thousands, asserts the firm.

Managing partner of Owen Hodge Lawyers, Rolf Howard, says he knows of several cases where the investor lost out because of this.

“In recent months I have spoken to a number of people who have been advised to set up a SMSF by financial practitioners. These people say they do not fully understand the ramifications behind such a move. That in itself makes them unsuitable to take on the responsibility of managing their own SMSF,” he said.

It is vital for anyone to have an investment plan prior to embarking on establishing a SMSF, as well as a discussion regarding the different investment options with an accountant, Howard said. Having the discipline to separate the fund’s activities from other investment expenses is also paramount.

From his experience, if a person does not have a minimum of $500,000 to invest, it’s difficult to justify the fund’s set up and ongoing maintenance costs.

“Some practitioners who offer financial advice don’t tell investors this as their focus is on seeking ways to increase their revenue streams to the financial detriment of their clients,” he said. “Many are touting a minimum of $250,000 is all that is needed. This figure is well short of the benchmark, in my opinion.”

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  • BrianC on 28/02/2014 10:15:30 AM

    Simple solution! Regulation from the Regulators!
    Proactive rather than reactive after the damage by the "Spruikers" has been done! Easy solution!

  • Pat on 28/02/2014 11:20:44 AM

    Whilst I generally would not recommend a SMSF for a balance of $250,000 or less, the lawyer's comments are ridiculous and he is just trying to make a name for himself.

    If a member/couple with $1,000,000 between them don't understand what they are doing, one would argue a SMSF is even less viable, given the potential ramifications of non-compliance through misunderstanding.

    Why the press is giving space to an opinion such as this is really questionable.

  • Innocent Observer on 28/02/2014 2:21:45 PM

    Agree with @Pat. SMSFs are widely oversold (in my professional opinion), however trying to fix a "minimum threshold" is potentially dangerous.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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