"Sherry also cites the finding that many SMSFs held more than 35% of their investments in cash or liquid securities."
Has anybody actually reviewed the investment strategies of the individual funds that have large cash assets, or spoken to the members? Maybe the reason they have done this is because they are close to retirement and don't want to risk losses, or are risk averse. I have clients who set up SMSF's because they simply don't like investing in shares and there aren't too many public offer funds that don't invest in shares.
Perhaps the issue here is that the industry and retail funds are the ones who have the mix wrong and that maybe they should ask their members what they want. Classic example for me is a phone call I got a couple of weeks ago from a client who is close to retirement and last year shifted his retail superannuation into a fund with a high cash component as he was planning to withdraw a lump sum and didn't want to risk a loss in value. He was confused as to how the cash component could have lost 20% of value and I had to explain to him that "cash" is not actually cash but various marketable securities (such as government and corporate bonds and notes) which drop in value as interest rates rise and may also include foreign currency securities which would also lose value as the AUD rises.
"Accountants, seeing a fee stream, have pushed them to small-business clients."
Am I really going to put at risk a $10,000 to $50,000 a year income stream from my client's existing work by pushing them into a vehicle that isn't suitable for them or that they don't want just for the sake of $2-3,000 a year? I have talked more client's out of setting up SMSF's (in one case when a client wanted to set up a fund to acquire a farming property so he could carry on a farming business, he changed his mind when I pointed out the fund would have to evict him and sue him if he ever fell too far behind in the rent) than I have put into them, and virtually all clients I set one up for have been the initiators.
And lets not forget the majority financial planners that push their clients into retail funds they work for or pay them the highest commission.
"He has created an advisory group stacked with industry members (there are no consumers or employers)"
Nor are there any representatives of the accounting profession despite the fact we are getting pilloried by the rest of the advisory group and are generally the professionals the majority of people will generally approach for advice and we certainly have a longer term and more personal relationship with our customers than any of the superannuation funds and financial planners do.
"The ATO survey found that 21% of participating SMSF trustees had a "low to medium" or "low" knowledge of their obligations."
And I think if you did a survey of retail and industry fund members they would have "low to medium" or "low"levels of knowledge of what those funds investments are and what they are doing with the money invested. See my example above of the client who didn't realise that cash does not mean cash when investing in a super fund. Also, how many members of retail funds would be happy with the fact it appears their investments are being used to aid and abet hedge funds in market manipulation against their best interests.
"Penalties would also be broadened. The only sanction now available to the Tax Office is to remove tax concession status."
What a load of crap. There are additional sanctions. If there is a breach of the Superannuation laws trustees and anyone else involved in the breach (including auditors who don't report it or advisers) can be fined up to $220,000.
