Financial fraud and misconduct costing SMSF owners $103 billion

Fraud and financial misconduct has cost Australian SMSF owners up to $103 billion.

Financial fraud and misconduct costing SMSF owners $103 billion

Fraud and financial misconduct have cost Australians who manage their own super funds more than $100 billion in the past 10 years.

Rainmaker Information research has revealed that the publicly reported losses for DIY super funds is three times higher than general financial fraud and misconduct, which totals $30 billion.

Rainmaker estimates the fraud-related SMSF losses at $103 billion, when taking into account the loss of income from not having the money to invest.

Australian Taxation Office figures show that around $700 billion in assets are held by SMSF owners.

SMSFs provide flexibility for investors to manage their own funds and allow them to invest in assets such as property.

Although popular, SMSFs don’t offer the same protection as regular super funds. If SMSF owners are conned or receive dodgy advice, no compensation is offered for any losses.

Industry and retail funds, are protected by the Australian Prudential Regulation Authority (APRA), and, therefore, should any losses result from fraud or misconduct , fund members  can apply to the Government for compensation.

“Fraud is prevalent across society; however, these alarming figures are particularly concerning for SMSFs considering SMSF trustees do not have the same protection and avenues for compensation as traditional APRA-regulated super funds,”  said Rainmaker Information Managing Director Christopher Page.

SMSF owners who suffer major losses are bailed out by taxpayers, who foot the bill for  generous concessions to funds and underwrite the Age Pension for those whose funds fail.

SMSF owners are vulnerable to certain financial planners who market themselves as professionals, but are largely unregulated and potentially untrustworthy.

Anyone who receives bad advice can lodge a complaint with the Financial Ombudsman, but there’s a limit to what they can claim back. SMSF owners should ensure their planners have  insurance.

 While SMSFs are a buyer-beware product, there are some simple steps owners can take to protect themselves, such as being wary of high-pressure sales tactics, offers of unrealistically high returns, and avoiding complex investment structures. SMSF owners are also encouraged to diversify investments and regularly monitor them for signs of trouble.

“We have a world-class governance regime in Australia, but it does not and never will prevent the incidence of fraud or misconduct, and so it is buyer beware and reliance on trusted individuals, but even then things can go wrong,’’ said Self-Managed Independent Superannuation Funds Association Chairman Chris Balalovski.

Read more SuperGuard360

Are you an SMSF owner? What advice would you give to would-be DIY super fund managers?

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    COMMENTS

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    MICK
    22nd Jan 2018
    10:12am
    The issue remains one of our judicial system. When crooks do hard time and plenty of it they will for the most part make a decision in their own interests. Until that time who cares as warnings and a slap on the wrist are much all the courts issue these days.
    White collar crime needs to be treated as a crime rather than 'this person is a pillar of our society and needs special treatment'.
    High priced celebrity lawyers should NEVER be the benchmark of what sentences, if any, criminals get.
    TREBOR
    22nd Jan 2018
    11:10am
    White collar crime costs billions... far more than holding up a bank. Time to take the gloves off....
    Anonymous
    22nd Jan 2018
    12:28pm
    I agree. The matter of high priced legal people has always made it difficult for the average person to come to grips with crime and punishment. Slightly off topic, I believe that it is wrong when those who are sportspeople or in the acting profession and are caught with drugs then ask for their crime to be "not recorded" as it may jeopardise their job when they travel overseas. The law doesn't apply equally for all.
    TREBOR
    22nd Jan 2018
    12:37pm
    Never did, OM - that's why I label the instruments of law as a set of organised criminal gangs. The three major gangs in Oz are the cops, the courts and the legislators.
    Eddy
    22nd Jan 2018
    1:01pm
    I think you left one out Trebor, you omitted the legal profession (or did you include them under "the courts").
    TREBOR
    22nd Jan 2018
    1:27pm
    Well ... legal fraternity, as my lawyer used to say.....
    TREBOR
    22nd Jan 2018
    1:27pm
    My omission......
    *Imagine*
    22nd Jan 2018
    10:30am
    Yes I do run a SMSF but I have never heard of the Tax payer (of whom I am one) bailing out failures. I quote from your article:
    "SMSF owners who suffer major losses are bailed out by taxpayers, who foot the bill for generous concessions to funds and underwrite the Age Pension for those whose funds fail."
    Does this really only mean that if you lose your money, then you get a pension?
    If it does only mean that, then what of it?
    If you spend all your money, gamble or your money, buy a super mansion with it, hide it or give it away, then if you are eligible, then you will receive a pension. So what is the point here? The money is not lost by the way, it is simply placed in the hands of another.
    MICK
    22nd Jan 2018
    10:51am
    I think you may have misconstrued what was written.
    Bailing out SMSFs was likely referring to people who blow their superannuation via a SMSF then falling back on the pension when they have gotten all of the deductibles with their investments. Sort of like double dipping.
    Personally I'd like to see an end to SMSFs and a return to GOVERNMENT FUNDED PENSIONS. Whilst most developed countries have an open retirement system Australia is almost unique in that the current government is seeking to remove anybody with two razoos from the pension system as has so far unsuccessfully brought the family home into the assets test. This will destitute most Australians....but that is the end game for the current rich man's government.
    I watched an SBS program last night which EVERY Australian needs to watch called "The Super Rich and us". AVerage citizens, no matter what their political leaning, need to watch this as it pieces together the game which the rich have played on us for over 4 decades. This explains the decimation of the middle class which has been evident for some time with America being the forerunner and the middle class being almost gone there. Coming to Australia as well.
    arbee
    22nd Jan 2018
    11:05am
    Mick, would you also like to see see a full socialist regime brought in as well where no-one has any retirement funds and all are totally reliant on the government system and we all walk around wearing little coolie uniforms.
    TREBOR
    22nd Jan 2018
    11:14am
    Like most, arbee, you either confuse or deliberately misunderstand what 'socialist' means in the West. Socialism in the West is but part of the balance between rampant greed/capitalism unbound and the consequent serfdom of the majority, and the need to retain some element of social and economic prosperity for all, so as to ensure a safer (it will never be 100% safe) and more livable society.

    There is plenty of money in the till for all that.... yet for some reason people want to equate socialism - something practiced by governments of all stamps here in the West - with some form of North Korean Neo-Monarchy/Tsardom or Bolshevist excess in the past.
    arbee
    22nd Jan 2018
    11:19am
    Trebor, we all know from which side of politics yourself and Mick come from, you both want to take everything away from those who may have accumulated anything in life and give it away to those who were just too damn lazy to do so or who had it and then just blew it all away. You are probably both living quite comfortably on your pensions and government top up pensions anyway.
    TREBOR
    22nd Jan 2018
    12:24pm
    I don't come from any side of politics, arbee, and neither does Mick.... unless you put the well-being of the people first and foremost.

    What a pack of nonsense - we've all accumulated things in life, and nobody wants to take it away from those who've done that, within limits.

    The ONLY argument you could have there is if you have already been gifted far too much by this society, which often means you haven't paid your way - and so you don't get as much in retirement from the government that has already paved your way.

    Your politics of envy is showing.
    Anonymous
    22nd Jan 2018
    12:30pm
    arbee, I have to point out that those who have no facts in a discussion quickly revert to character assassination.
    TREBOR
    22nd Jan 2018
    12:31pm
    Let me try something for you, arbee. Do you seriously suggest that those who are currently stuck in 'part-time casual', and have no genuine opportunity to put away a stash or accumulate assets, are somehow 'wasters' who spend all their time on the pokies, piss, puppies, ponies etc?

    Three things you need to avoid is assuming that those who've often had disasters in life are just wastrels, that somehow those who've had a easier run are 'better', and that the politics of fear-mongering put about by political parties actually means anything - e.g. those nasty socialists want to take from those who've worked hard to put it together....

    Well, no - they don't - just like the 'conservatives', they just want to catch the cheats out and make them pay their way, and if you are not one of those cheats, you have nothing to worry about.
    KSS
    22nd Jan 2018
    1:05pm
    Trebor says: "What a pack of nonsense - we've all accumulated things in life, and nobody wants to take it away from those who've done that, within limits."

    There's the kicker.... within limits!

    So accordingly, does that mean Trebor is the arbiter of those 'limits'? Looks like it if their next paragraph and following post is anything to go by.
    TREBOR
    22nd Jan 2018
    1:21pm
    You think you should be entitled to put away millions upon millions in assets while playing the 'business' card or similar, KSS, meaning that you aren't paying tax on your total income .. or put away millions towards your super without paying tax along the way?

    What part of 'catching the cheats' do you not understand?
    arbee
    22nd Jan 2018
    3:12pm
    Sorry Trebor, but I don't fit your scale models. Neither society or family has ever gifted me anything, having come from a country background originally and moving to the city flat broke while in my early twenties.

    Worked 12 to 16 hour days driving taxi trucks for a year or two then went subcontracting for another company driving to rural cities for a while where it was not uncommon then to be working 36 hours without a break. When they got further and further behind in paying us they just laughed at us when we said we would start in opposition to them if they didn't pay.

    25 years later I sold a reasonably large transport operation that was employing more than 30 people at the time. If this is what you call being "gifted" then I would hate to see what you would describe as hard work.

    Unlike many others in the industry myself and my business partner never took wages until all employees and subcontractors were paid first. If I had been like a lot of others and taken advantage of people working for me I could have retired a multi millionaire which I certainly am not now. Through good advice we opened our SMF in about 1979 and have controlled it ourselves ever since.
    TREBOR
    22nd Jan 2018
    7:52pm
    arbee - you sound remarkably like my good self, with a few changes.

    The point is nobody is trying to take from you except the government with all of its changes, and I have always stood for genuinely equal treatment for all retirees, which often means those who have a bit more should also be left alone and not used as opportunities for government to not meet its responsibilities.

    I don't have a set of scenarios from which I work... every case is different and all should be judged on merit.
    arbee
    22nd Jan 2018
    11:00am
    On doing a search on Rainmaker, it appears they are a financial advisory group predominantly in the Superannuation field. If the majority of their business comes from pushing clients towards large funds then they would have a vested interest in putting down SMF funds. If you committed fraud with your own SMF how can you lose your own money if it was yourself who committed the fraud, and if you let anyone else have control of your SMF then you are looking for trouble.
    TREBOR
    22nd Jan 2018
    11:19am
    It seems some MAY be running down their SMF so as to secure a Pension... no way I'd be doing that, but I can see that many might feel that under the current regime of chopping away at retirement funding, they would be better off getting the Pension.

    Blame for that lies with government policy, and it is frankly disgusting to now turn around and label those thus subjugated by fear and forced into seeking an alternative strategy for their retirement as 'rorters' and 'fraudsters'.

    Frankly - if a government is going to rip the merde out of people's retirement packaging, it has only itself to blame when people seek their best return from that government as an alternative.

    Stoopid is as stoopid does, as they say down in Green Bow
    arbee
    22nd Jan 2018
    11:24am
    Trebor, unfortunately governments for the last 20 or 30 years have been hacking away at superannuation one way or the other, because they all look at it as a cash cow to the treasury.
    TREBOR
    22nd Jan 2018
    12:25pm
    I see the beginning of understanding that we are on the same side, here, arbee.
    TREBOR
    22nd Jan 2018
    1:44pm
    BTW-I use the term Pensioner(s) for those on Pension, and Retirees for the entire run of retired persons. So when I refer to Pensioners, I am referring to Pensioners only, though that includes part Pensioners as well..... tricky..

    Mostly I say retirees to cover the lot...and have long advocated that none should fall below the basic standard of the Pension, as happens to some SFRs in a decline or when (gasps) lead astray or defrauded of their money, and that all should receive a health benefits card etc.

    If you're retired, you're retired and should receive the same benefits.... the problem always is that pesky assets test - so under The Trebor Scheme......... all would receive Pension and HCC etc, and all would be liable for tax on income, fringe benefits or outright gifts (Harry Fudger taking a free ride on the Fudger Chocolate Company private jet or being loaned a lazy mill or so to go to the races) that substitute for income.

    That'd be a kicker, wouldn't it? Catch most all your 'retired' politicians..... with their multiple income strands for life... imagine Julia Gillard paying tax on the assistance given her by embassies around the world as she flits from hither to yon at our expense... first class.......
    TREBOR
    22nd Jan 2018
    11:09am
    I bring you The Trebor Scheme..... as laid out for you many times before...

    Maybe I should be that 'man on a horse' who takes over the nation, that I just discussed in another forum....
    Tib
    22nd Jan 2018
    12:07pm
    Financial planner= unemployed insurance salesman.
    TREBOR
    22nd Jan 2018
    12:32pm
    Unemployed used car salesman.
    Anonymous
    22nd Jan 2018
    1:23pm
    Unemployed Prime Minister.
    TREBOR
    22nd Jan 2018
    1:28pm
    *rolls about laughing*
    TREBOR
    22nd Jan 2018
    12:35pm
    Anyway - the issue under discussion is fraud and misleading information from planners and advisors... a different issue from SMFRs cheating to get a Pension.

    Sorry about the distraction.

    If an advisor is guilty of deliberate fraud or misleading, the punishment should be severe. They are dealing with people's lives and life savings here - not some nest egg they can access for their own use.

    The hard part is proving deliberate fraud etc......

    (the door is open, people - how about we just make it an automatic offence to mislead?)
    KSS
    22nd Jan 2018
    1:07pm
    "how about we just make it an automatic offence to mislead?"

    It already is!
    TREBOR
    22nd Jan 2018
    1:26pm
    Ah - so the issue is whether or not that is being pursued properly...... it's like the bloke asking a woman if she'll sleep with him for $10 and she says, "No Way!"... so he offers $10,000 and she says YES.... so it's just a matter of money......

    So now that we have established the current validity of the opportunity to prosecute for misleading........ HOW do we go about proving beyond a reasonable doubt that this was intentional?

    That is the difference between it being an automatic offence and not an automatic offence..... if it were an automatic offence in all cases...... all that is required is to determine the severity of damage... and thus the severity of punishment - which, BTW, can only be used in cases of proven deliberate misleading....

    Point is - if misleading information leads to loss, making of it an offence would make it easier to recoup losses via law suit.......

    So here we go down the old 'government must have total control' track...... oh, dear..... they tried that with domestic violence and all that caused was an escalating casualty rate on all sides....
    Anonymous
    23rd Jan 2018
    12:27pm
    It's not a punishable crime to attain benefit (pubic office and a massive pay cheque and retirement fund) by lying to the public, and in doing so destroying the retirement of hundreds of thousands.

    Why then, should it be a punishable crime to lie to rip off an SMSF trustee?

    I wonder was the money ripped off retirees by a lying government changing the assets test counted in the $103 billion?
    TREBOR
    23rd Jan 2018
    3:09pm
    Hmm - yeees... let's set the precedent and we'll make politicians more accountable..... the burden of proof of deliberate scheming is obvious, but difficult.

    "Oi were only doing what I fought were best for the country!" ... wouldn't wash if you were dragged into a court....

    22nd Jan 2018
    4:30pm
    Only an idiot would go into an SMSF without the financial ability to run in themselves
    TREBOR
    22nd Jan 2018
    7:54pm
    True - but at the same time trusting advisors can be a trap...... the ex's daughter and her (ex)husband bought into a property development on the advice of such a one - the ex and I both said:-
    'Don't Do It! Listen to your elders who are wiser!'

    They did, and now they're in a hole for $60k.

    22nd Jan 2018
    5:08pm
    SMSF is therefore a trap. Fraud = our society at its own throat. Morality and ethics have gone down the tubes.
    TREBOR
    22nd Jan 2018
    8:01pm
    I think it's the advisor business that can be a trap - most people who manage their own do all right.. and you don't pay fees or have anyone to blame but yourself for mistakes.

    I still say the absolute bottom line for annual income should be Pension rate.. nobody should fall below that regardless of the reasons why.

    23rd Jan 2018
    12:31pm
    Here we go! The beginning of the campaign to remove freedom to manage your own retirement plan. Force everyone into institutional super. Predictions that the government will come after superannuation savings next have been becoming more frequent. Is this the first step?
    TREBOR
    23rd Jan 2018
    3:11pm
    That was always the problem with The Trebor Scheme, Rainey - anything of that nature is just too lucrative and full of gold for any political party to keep their hands of it for long...

    Maybe (snuckles) we need to park it in the Caymans in the hands of a truly independent bank, out of their reach..... and not pay tax on it as well... a truly National Futures Fund.......