28/04/2014

They say the best things in life are free, however a recent ASIC investigation has revealed that this may not be the case when it comes to SMSF products.

SuperHelp, an SMSF administrative service, ran an advertisement late last year for free SMSF and Pension setups. Although stating “conditions apply”, these conditions were not part of the advertisement and could only be located on the SuperHelp Website. ASIC soon discovered that the offer for a free SMSF setup was conditional on the payment of a 1 year subscription fee before the SMSF would be established.

At the centre of the ASIC findings was the issue of ‘false and misleading’ advertising. By using the term ‘free,’ ASIC was concerned that consumers might make “inappropriate financial decisions”. By not clearly stating the associated fees and products required to access the ‘free’ service, consumers could be led to believe that the free setup was a true reflection of the cost of the service. SuperHelp was ultimately required to pay a $10,200 infringement notice penalty.

This is not the first time ASIC has been required to investigate advertisements in relation to SMSF products. Earlier this year, Media Super Limited was also fined for producing potentially misleading information about the performance of its funds against SMSF products.

As the saying goes, “there is no such thing as a free lunch.”  When making decisions regarding SMSFs, it is vital that the true cost of the service is considered, and not only in a financial sense.

When considering “free” or discounted products, it is important to consider a number of factors including:

• the level of service, both initial and ongoing
• the quality of the product or service
• whether the service or product is more restricted or narrow than normal
• what other conditions are attached to accessing the product or service
• whether the purchase will lock you in to a particular provider in the future

As the new penalty regime for SMSFs draws closer, advisers and their clients need to be aware that poor product choice could see trustees being hit with heavy penalties if they are not careful in ensuring fund compliance.

If you have any questions in relation to this article or any other superannuation matters please call us on (02) 8296 6222.