SMSF Trustees Warned About Bad Advice

A flashy ad, a “free comparison”, a confident voice on the phone and suddenly your superannuation is heading into a self-managed super fund you never planned to run. That’s the real-world pattern behind recent AFCA decisions allowing some Australians to recover retirement savings after being steered into SMSFs through inappropriate financial advice.

Lisa Leong is joined by superannuation specialist Marco Mulato to walk through how these schemes can unfold step by step: the marketing hook, the promise of higher returns and “sophisticated investments”, and the push to roll over from a public offer fund that may already be a great fit. We talk about the moment where things get even riskier, when SMSF money is channelled into a narrow set of managed funds and then into illiquid assets like private equity and private debt. If you can’t sell when you need to pay a pension or change strategy, “good performance” can become meaningless fast.

We also dig into the practical lessons for everyday Australians. We share simple ways to tell whether you’re being advised in your best interests or being sold a product, what to look for in a trusted professional, and the self-check questions to ask before you take on SMSF trustee duties. Marco also addresses the life-stage reality: why many SMSFs get wound down later in life, and why complexity can become overwhelming.

If you care about protecting your retirement savings and making smarter super fund decisions, listen now, share this with a mate who’s been pitched an SMSF, and leave a review to help more Australians find the show.

DISCLAIMER: This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs, before acting on it. If you’re confused about what that means or what your needs are, you should always consult a licensed and trusted financial planner. Unfortunately, we cannot guarantee the accuracy of the information in this podcast, including any financial, taxation, and/or legal information. Remember, past performance is not a reliable indicator of future performance. The Rask Group is NOT a qualified tax accountant, financial (tax) adviser, or financial adviser. Access The Rask Group's Financial Services Guide (FSG): https://www.rask.com.au/fsg

Transcript

Podcast And Station Welcome

SPEAKER_00 0:00

The Talk Investing Podcast and blog discusses investment advice from our previous podcasts and radio shows by Remo Greco and Marco Melado. Learn all things around retirement and investing.

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On the ABC Listen app, your smart speaker.

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And on your radio.

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This is ABC Radio Melbourne and Victoria.

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With Lisa Leon.

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Let's do on

AFCA Steps In On SMSFs

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the money now. You're with Lisa Leong, and we are doing superannuation this morning. You may have looked in the news or heard in the news that the Australian Financial Complaints Authority has allowed the recovery of thousands of dollars in retirement savings off the back of inappropriate financial advice, which basically convince people to withdraw their money and establish self-managed super funds. What are some of these tips and what are some of the traps to do with self-managed super funds? We have Marco Mulato, our superannuation specialist, with you right now. Marco, good morning.

SPEAKER_02 1:09

Glad to be here, Lisa.

SPEAKER_03 1:10

So can you give us uh a little bit of the background of what's been happening and why this intervention?

How The Sales Funnel Works

SPEAKER_02 1:16

So uh what's happened recently uh and it's come out in in the papers so it's public is there's been some pressure applied to consumers to switch or roll over from existing public funds, which are probably really suitable for them, into self-managed super funds. So this is pretty aggressive sales type strategy stuff that is often phone call-based. So they might call a consumer. Trevor Burrus, Jr.

SPEAKER_03 1:47

Well, some social media as well. I was reading.

SPEAKER_02 1:49

Social media is in there as well. So this is often the catalyst or the trigger where a consumer might be looking at a really well-designed ad that uh starts to PK their interest around a better superfund. It happens to be a self-managed fund, might direct them to a website to compare funds. Surprisingly, the self-managed fund comes up on top as the benefits of the A.

SPEAKER_03 2:11

What's

The Hidden Risk Of Illiquid Assets

SPEAKER_03 2:12

the sales promise, Marco?

SPEAKER_02 2:13

The sales promise is access to more inverted commas, sophisticated investments and higher returns. So that's a pretty tough uh guarantee to make. And so that tends to get a lot of attention. And so in this in these particular cases, these consumers have been convinced to roll over all their money into a self-managed superfund. It doesn't stop there, though. Once the money is in the fund, they're then convinced to put it all into a particular managed funds all run by the same fund manager. Doesn't stop there also because those funds then invest in what we call illiquid type assets, which are things like private debt and private equity. Illiquid means it's very difficult to get your money when you need it. And so, for example, the investments might be made. You might then need to access some of that, for example, to pay a pension, or you just want to change investments. You get a big resounding no because the assets that the money is invested in are illiquid, they can't be readily sold, and so you're stuck.

Compensation Rulings And Insolvency

SPEAKER_02 3:15

AFCA, who's the uh complaints tribunal essentially, uh has had a really good look at a lot of these cases. They think there's about 500 who've been affected in this particular instance. They've granted two funds at this stage uh compensation, essentially. The problem is the uh the firms that have been involved in this are now all insolvent. Trevor Burrus, Jr.

SPEAKER_03 3:38

And is that how this all happened anyway? So the firm that's involved basically you've lost your money and you're trying to Yeah, basically so the the financial planner's business is insolvent.

SPEAKER_02 3:50

They happen to be related to the administrator who was managing the self-managed super fund for them. They're now insolvent. They were then transferred to accounting group which are now insolvent. So all these related parties who all knew each other are involved. The funds management business is still running, so this is the actual investor of the funds, but they're being looked closely at as well. And the fact remains that the investments they're in are still illiquid, they cannot readily be sold.

SPEAKER_03 4:18

I mentioned earlier, Marco, that we really wanted to look at some of those tips and traps then. So what are our lessons from this?

Sold To Versus Advised

SPEAKER_02 4:26

So I think one of the one of the big ones is when you're being promoted to in relation to switching super funds is to try to understand whether you are being sold to or you're being advised in your best interests. And I think one of the things I've learned over the years is that when the conversation is always about product and investment returns, you're often being sold to. When the conversation is more about what you need, what your objectives are, how the suitability of the fund, uh looking forward ten or fifteen years, is it still going to be suitable and appropriate? That's more along the advice line. So they're very different conversations. So you have to be so careful about being sold to versus being advised. The other thing is I think you need to try and find trusted professionals, well-credentialed, who are highly

SMSF Suitability And Trustee Duties

SPEAKER_02 5:20

experienced. And so that is a bit on you as the consumer to try to work that out. It it it often is the case that you might have friends or acquaintances that are using a good advisor already, and so that's a really good place to start. But you've really got to try and get to the background of these people and understand what their motivation is.

SPEAKER_03 5:37

And for me, one of the starting questions are, are you suitable to run a self-managed super fund? So what questions can you ask yourself before you even think about doing something like this?

SPEAKER_02 5:48

Aaron Ross Powell Precisely. And so a little bit of work here uh by you is essential because a self-managed super fund works very differently to public offer funds. You become a trustee, and so if you start to read about what trustee duties are, yeah, they're pretty serious, right? You've you've got a lot on the line because you're the trustee of your own superfund. So you immediately start to have alarm bells go off around how serious this position is. You also have to have a lot more involvement and engagement in your fund. So if you're not someone that wants to do that, a self-managed superfund is often not going to be the right structure. And I think finally the j just the ability to do a lot in your current superfund might be enough for you. So whatever your current fund is offering you might be more than enough in terms of what you need. So why are we going to go to this other structure that's more complicated?

When An SMSF Makes Sense

SPEAKER_02 6:38

Trevor Burrus, Jr.

SPEAKER_03 6:38

Something that's just occurred to me is a self-managed super fund, is that something better to do earlier in your life rather than the last thing you do? Um because of this, it's just so complicated.

SPEAKER_02 6:49

Aaron Powell Yeah, possibly. I mean, so the the numbers probably bear that out. You've got a lot of self-managed funds being wound down from from from you know in when people are in their their later stages of life because it just gets overwhelming and and all-consuming. And you've got a lot more funds being opened up by people in their forties and fifties.