BGL Corporate Solutions, a leading developer of ASIC corporate compliance and SMSF administration software and systems, is “incredibly concerned” by ASIC’s ‘Are SMSFs for you?’ letter to self-managed fund trustees.
In a statement last week, on October 24, Ron Lesh, BGL’s managing director, said: “The document, in our opinion, contains numerous calculation and logic errors. We wonder what ASIC’s view would be if an industry or retail super fund published a document that was so misleading and contained so many errors … Donald Trump would call the document ‘fake news’.”
The statement from the specialist administrator follows comments the previous week by John Maroney, the chief executive of the SMSF Association.
Maroney said: “Although the Association concurs with ASIC’s message to ‘speak to your financial adviser about whether an SMSF is right for you’, it’s disappointing that the tone of the ‘fact sheet’ casts SMSFs in a very poor light. By the ‘fact sheet’s’ focus on risks and the use of inconsistent data sources, SMSFs are again portrayed negatively, especially those funds with balances of less than $500,000.
“We take issue with the representation that the typical cost of running an SMSF is $13,900 a year. The use of averages ignores distortions from very large SMSFs and those who choose to use extensive administration and investment services. We will consult with ASIC on the use of this figure, noting that the SMSF software provider Class [BGL’s major competitor] in its submission to the Productivity Commission, indicated the adjusted average cost for lower-balance funds was about half that amount or even lower, while our understanding is that many SMSFs operate with total annual expenses below $5,000.
“Although the document explicitly states that ‘care must be taken when using SMSF performance figures, particularly when making comparisons’, it still argues that SMSFs with balances below $500,000 underperform, on average, the APRA-regulated funds.”
Now, BGL has analysed the 2018 data for almost 180,000 SMSFs on its ‘Simple Fund 360’ platform. The real data tells a very different story from the ASIC document – so different that one must question both ASIC’s motive for the release of this misleading document. Lesh says.
“This is what we get when figures produced by one regulator (ATO) are used by another (ASIC) that seem to have a total lack of understanding of the dataset. The real data however tells us a very different story from ASIC’s ‘fake news’ document. The cost of operating an SMSF certainly does vary by size of fund. But the amount of $13,900 quoted by ASIC as the annual cost of running a SMSF is simply rubbish.”
According to the BGL analysis, the real costs of running an SMSF are more accurately represented in its table below:
“ASIC has also made some outrageous claims, in our view, around fund performance,” Lesh says. “It would appear this calculation is also incorrect. But what is more concerning is the bias throughout the document. If it was not published by ASIC, you would think it had been published by an industry super fund deliberately to tarnish the value of SMSFs. The industry funds still do not seem to understand why Australians in the thousands roll large balances out of their funds into SMSFs.”
Lesh challenged ASIC to provide details of how the information in the letter to trustees was calculated. He added: “BGL will publish SMSF performance data next week which will highlight more errors in ASIC’s document.”