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Advice on self-managed superannuation funds: Disclosure of costs

This newsletter (INFO 206) provides a guide to Australian financial service licensees (including AFS license) and their representatives, who provide personalized advice to retail customers on self managed super fund.

This explains:

Relevant Implementation and Disclosure Obligations

  • the need for consultation on the effectiveness of SMSF - especially if the initial balance is less than $ 200,000

  • The need for advice on the cost of creating, operating and liquidating SMSF

  • The need for advice on SMSF's permanent availability for the customer.

  • It provides "compliance guidelines", indicating that ASIC is probably more attentive to our monitoring activities.

It must also help AFS licensees and their representatives comply with the obligation to provide and disclose information in sections 7.7 and 7.7A of the Corporations Act 2001 (Corporations Act).

It focuses on the costs associated with the creation, operation and removal of the self managed super fund, and must be read in Schedules 182. Cross-switching Recommendations: Compliance with Obligations (INFO 182) and an Information Sheet 205. Tips for self-managed pension funds: the disclosure of risk information (INFO 205)

The disclosure given in this information sheet must be provided to the retail customer during the consultation - usually through a SOA. However, as a best practice, AFS licensees and their representatives should also provide these revelations to retail customers personally, regardless of whether the card (or will be) specified in the SOA.

Relevant Disclosure and Disclosure Responsibilities include:

Interest and related debt obligations that require the provision of consultancy services in the provision of personal consultancy to retail customers:

  • act on behalf of the customer (section 961B)
  • provide appropriate personal advice (section 961G)
  • notify the customer if the advice is based on incomplete or inaccurate information (section 961H)
  • Customer Interest Priority (Section 961J)

SOA Requirement to Provide Retail Customers with Custom Consultancy Provision (Section 946A) - If SOA is not a personal counseling tool, SOA must provide it as soon as possible after consulting, but in any case before the customer will act on the advice of (section 946C)

Additional information that should be included in the SOA, when the board recommends replacing one product with another (switching tips) (section 947D).

Providing retail customer advice on creating and / or switching to self managed super fund will prompt you to report on the risks and costs associated with creating and / or switching to SMSF.

Below are some examples of costs that need to be considered by the consultant and disclosed to retail customers. For examples of risks that need to be considered and disclosed, see INFO .

Self managed super fund: Effectiveness Guidelines

An important consideration is whether the SMSF balance is convenient for the customer. If this is not economically viable, it is unlikely that it will be in the interest of the customer.

Initial sales of less than $ 200,000

In many cases, the recommendation for a retail customer to create a self managed superannuation fund with an initial balance of $ 200,000 or less is unlikely to be in the best interest of the customer. Costs for establishing and operating SMSF with a balance of $ 200,000. United States of America is unlikely to be competitive in comparison with the fund, governed by Australian Prudential Regulation (APRA). Therefore, the client cannot be in a better position than the use of the APRA regulated pension fund.

However, there are circumstances where an SMSF with an initial balance of less than $ 200,000 may be in the interest of the customer, for example:

  • Where the tutor is ready to take over most of the SMSF administration and manage the investments to make it cheaper or cheaper
  • Where an important resource (eg, business type or legacy) or funds for another old-age benefit account will be transferred to the fund over a short period of time (for example within a few months) after the creation of the SMSF.

There will also be a situation where SMSF with an initial balance of US $ 200,000 or higher does not meet the client's interests as it does not meet their goals, financial situation or needs. For example, a client may not have the skills, time, or experience to properly carry out the duties of a tutor.

In cases where an opinion is given on the creation of a low-level self managed superannuation fund, we expect the board to communicate clearly visit our site

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