Free SMSF Establishment Services: Look Before Your Leap

Posted in Wealth
30/01/2014 Level One

This is a media release from the SMSF Professionals’ Association Australia (SPAA) published on Tuesday, 21 January 2014.

SPAA has warned investors about using the “free” establishment services offered up in the marketplace, as often exorbitant ongoing fees are charged as well as investors being signed up to lock in contracts for ongoing services.

When you establish a self-managed superannuation fund (SMSF) with Level One you are never locked into a contract and all fees are disclosed to you before you proceed.

The main benefits of a SMSF are control, transparency and flexibility and at Level One we will always afford you these benefits. We offer a portfolio management service to all of our SMSF clients, however if at any time you do not wish for your portfolio to be managed by Level One you are free to manage this yourself or utilise the services of another professional adviser.

We pride ourselves in providing our clients with the highest level of professional service and strive to maintain open and honest communication with our clients.

We believe SPAA’s warning here is a timely reminder that “there is no such thing as a free lunch”.

Potential self managed super fund trustees should think carefully before accepting offers of free establishment services, says Graeme Colley, Director, Technical and Professional Standards of the SMSF Professionals’ Association of Australia (SPAA).

Colley says that the concept of a free establishment service is not wrong per se, but people need to fully understand what’s involved. “That old saying, there’s no such thing as a free lunch, comes readily to mind.”

He says there are several issues to consider about such offers.  “It may be linked to an SMSF borrowing or may be used as a ‘catch’ for a more expensive on-going services that locks you in.

“Although establishing the SMSF may be free, the ongoing costs may be higher than what is available elsewhere in the market. Remember, too, some of these ongoing services may be available on a user pays system.

“The ongoing services may limit the type of investments into which the fund can invest such as a small range of shares, cash and fixed interest. Alternatively, are you signing up for a package, some of which you do not want or will ever use?”

Colley says it’s critical before entering into any administrative arrangement for clients to do their research and compare the type of services that are offered as well as the costs with other service providers in the market.

“They also need to consider the extent of the service, flexibility and depth of what is being provided as well as comparing the overall cost of administering the fund, and not just the cost of setting it up,” he says.


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