By Olivia Long

There has been a collective cheer across the SMSF sector in recent weeks; it could be heard from Perth to Cairns, from Hobart to Darwin. The reason? ASIC decided to start proceedings in the Supreme Court of New South Wales seeking interim and final orders to prevent property investment promoter, Park Trent Properties Group (Park Trent), from carrying on an unlicensed financial services business.

Make no mistake; this was cause for our superannuation sector to celebrate. For more than two years, anyone associated with SMSFs, but particularly the dedicated professionals who advise the more than one million trustees and members, have been working under a cloud. Not a cloud of their own making, mind you, but a cloud nonetheless.

It’s been the direct consequence of the entry of property spruikers into our industry, the unscrupulous few who see an SMSF nest egg as a vehicle to promote property sales. They have no interest the fund’s long-term goal of self-sufficiency in retirement; they have every interest in making a quick dollar.

So when ASIC alleged that it is seeking declarations that Park Trent is unlawfully carrying on a financial services business without an Australian Financial Services (AFS) licence, every professional in our industry walked a little taller.

ASIC was drawing a line in the sand – and we are the beneficiaries.

In the ASIC statement, Commissioner Greg Tanzer said: “Collectively, Australians hold over $1.85 trillion worth of assets in superannuation funds, with $557 billion held in SMSFs. It is important when making decisions regarding superannuation to consider obtaining appropriate advice from an authorised financial adviser.” I could not agree more.
The industry, of course, has not been quiet on this issue. Every forum I have attended over this period has seen the issue raised – with everyone of the strong view that the regulators needed to do more.

We were acutely aware that this property spruiking, while only occurring on the fringes of the SMSF sector, was portraying a false and, more importantly, damaging perception of SMSFs, so this move by ASIC could not have come sooner.

It wasn’t just the cowboy image it portrayed, as bad as that was. In my opinion far greater damage was being done by the growing perception that SMSF trustees are a gullible bunch who will willingly embrace any get-rich-quick scheme. In my experience, nothing could be further from the truth, but, as that old saying goes, perception is everything.

Certainly it was providing ammunition for those in the superannuation industry who, finding the SMSF sector a threat, to begin mounting their old, discredited arguments about the need for more trustee education or a minimum level of funds under management before setting up an SMSF. This was evidenced in submissions to the Financial System Inquiry.

The reality is that residential property, while increasing as a percentage of total SMSF assets, is still only around 3.5%, dwarfed not only by equities and cash but also commercial property. Borrowings to acquire residential property has also been growing, but again as a percentage of total SMSF assets, is miniscule.

Residential property is an asset class that rightly belongs in an SMSF – provided it is part of a diversified portfolio and fits within the long-term investment goals of the fund. Quite clearly the setting up of an SMSF simply to acquire a property, falls well outside these guidelines, as ASIC has been consistently warning.

What we are seeing now is that with this court action the regulator is matching his words with deeds. I can only applaud.