ASIC SMSF fact sheet exaggerates costs

In a statement released on Friday, Investment Collective managing director David French said the statistics provided by ASIC in its fact sheet, Self-managed superannuation funds: Are they for you?, contained “seemingly deliberate inaccuracies”, particularly around the expenses involved in running an SMSF.

“ASIC claims that the average cost of running an SMSF is $13,900 per annum — the data apparently came from the Productivity Commission, but ASIC has made no attempt to explain that this average is distorted by the costs of some very large funds, and has not been considered in relation to the services that are included for the money,” Mr French said.

“In my experience, costs specific to running an SMSF rarely exceed $1,500 per annum.”

He added that figures used in the fact sheet showing APRA funds outperforming SMSFs in a number of cases could not be relied upon for an accurate comparison, given the varying risk profiles and objectives of SMSF members.

“ASIC knows it’s on shaky ground in reporting Productivity Commission return figures for SMSFs, that’s why it has included a footnote to cover the inadequacies of the data,” Mr French said.

“Such data is distorted by any number of factors peculiar to the individual fund and is not suitable for the calculation of performance figures. In particular, many investors are conservative by nature and they often prefer higher weightings of lower risk assets.”

In a recent blog post, SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley also pointed to the performance statistics as misleading, saying the ATO data used by the Productivity Commission could not be used to make an “apples for apples” comparison.

“It is recognised that comparing costs of running SMSFs needs to be made more transparent so that each type of fund can be accurately compared,” Mr Colley said.
“The comparison issue is ongoing, but the ATO statistics for SMSF recognise that it is not possible to compare APRA-based funds with SMSFs.”

Mr Colley said the data around underperformance of SMSFs with a balance of under $500,000 was particularly deceptive, as only a very small minority of funds fell into this category.

“The report from the commission states that SMSFs with balances of less than $500,000 produce lower average returns. It would have been useful to recognise that the average balance of an SMSF, usually with one or two members, is about $1.223 million,” he said.

“ATO statistics say that, in total, there are only about 8 per cent of funds which have balances below $500,000.”