That old 'elephant in the room'

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What happens if a self-managed super fund trustee feels their level of knowlege is not up to scratch or even gets dementia, asks a prominent academic.

Dr Joanne Earl, senior psychology lecturer at University of New South Wales, has been doing a comprehensive study over the past seven years into retirement planning behaviour, including financial literacy.  

Her research, in collaboration with National Seniors Australia, is looking at how retirees are coping in certain aspects of their lives, as mastery is one of the best predictors of retirement adjustment.

She has been looking at SMSF trustees as a distinct group which has a higher level of financial literacy than other retirees – but may still not have the level of mastery they require to run an SMSF.

“What marks SMSF trustees out from other retirees are they want to do things themselves. They want that higher degree of autonomy.  Mastery is more important to them.”

However, Earl is worried people are not discussing what happen when SMSF trustees start suffering from dementia.

“It’s impossible to overlook the fact that one in 10 people over the age of 65 will be diagnosed with dementia. And so I can see the issue where people are managing vast amounts of money.

“It’s sort of like the elephant in the room – no one wants to raise it and talk about it, but we really need a strategy to deal with it.  It raises questions like whether SMSFs are life-cycle products, and when an adviser should have a conversation with the trustee about enduring attorney and all of those sorts of things.

“Becasue it’s not just the individual trustee; it’s their families who are affected, too.”

But despite this, Earl is strongly opposed to compulsory testing of trustees, as suggested last week by visiting financial literacy specialist Dr Robert Holzmann.

“I am absolutely against the whole idea of making testing for financial literacy and cognitive ability compulsory, absolutely against the idea,” she said.

“I think what that would do is discourage people from seeking assistance where they need it most, because they get fearful if they reveal an area where they are deficient, and then there’s going to be consequences.”

Earl compared it to a retiree going to the doctor and reporting headaches and then “next thing you know” their driving licence is revoked.

“I think if you start to make these systems compulsory you start to drive these anxieties underground.”
She is, however, in favour of easy-access education.

“I believe there are portions of SMSF trustees who think they need higher levels of knowledge than they have and I know this because when I run studies people want to know their financial literacy scores. So that’s suggesting to me they’re keen to know whether they are on the right track.”

Earl is looking for 25 more retirees to become involved in the testing by 19 December. She said it would suit people who want additional information on their health and financial literacy, as the same people are tested every six months so they can get feedback on whether their scores are deteriorating or not. Results are confidential.

Any advisers who have clients who want to get involved or know more, contact Joanne Earl on (02) 9385 0803 or email


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