The SMSF Professionals’ Association of Australia is warning potential self-managed super fund trustees to think carefully before accepting offers of free establishment services.
SPAA Technical and Professional Standards director Graeme Colley says while the concept of a free establishment service is not wrong per se, but people need to fully understand what’s involved.
“That old saying, there’s no such thing as a free lunch, comes readily to mind.”
There are several issues to consider about such offers, he says.
“It may be linked to an SMSF borrowing or may be used as a ‘catch’ for a more expensive, on-going services that locks you in.
“Although establishing the SMSF may be free, the ongoing costs may be higher than what is available elsewhere in the market. Remember, too, some of these ongoing services may be available on a user pays system.
“The ongoing services may limit the type of investments into which the fund can invest such as a small range of shares, cash and fixed interest. Alternatively, are you signing up for a package, some of which you do not want or will ever use?”
It is critical clients know that before entering into any administrative arrangement they should do their research and compare the type of services that are offered as well as the costs with other service providers in the market, Colley says.
“They also need to consider the extent of the service, flexibility and depth of what is being provided as well as comparing the overall cost of administering the fund, and not just the cost of setting it up,” he says.