In Australia, there aren’t really any rules around SMSF trustee education. The only time the regulator (the ATO) makes trustees do a course is when they’ve messed up and made it obvious that they don’t know what they’re doing*. Other than that, SMSF trustees are more or less trusted to a) know what they’re doing, or b) get proper professional advice.
For a lot of self-managed super funds, this just isn’t an option. It may be not just the trustee’s money and future they’re playing with, but also the future of a highly dependent member such as a disabled child. Even when all members are capable adults, many don’t think it’s a good idea to let trustees proceed without background knowledge, whilst running the risk that if they lose all their money, they may end up relying heavily on Centrelink and taxpayer-funded public services. It’s for these reasons that SMSF trustee education is back in the spotlight again.
Some pushing for SMSF trustee education rules
Most (if not all) industry professionals agree that higher standards for advisers are a good thing. High standards lead to more trust in the profession, which is better for business. In fact, the government’s due to get some legislation going soon around new adviser standards, including new education standards. But not everyone thinks that everyday trustees should have to have a certain level of education. Those that do tend to stir up a bit of grumbling from trustees who’d rather leave 99% of the work to someone else.
Early this year, consultant John Wiseman released a statement in response to the government’s proposed new adviser education standards. He told some media outlets that “Trustees should be required to have a minimum level of education to undertake an SMSF, and both the government and industry should be concerned by this lack of financial literacy and competency.”[ii] He says that only making trustees do a course after they’ve gone down the wrong track is a bit like only making drivers take a license test after they’ve been in an accident.
Pushback from trustees (and some advisers)
Some who commented on coverage of Mr Wiseman’s statement mentioned that education rules might cause trustees to think they were educated and therefore didn’t need professional investment advice any more. Others seemed to think it was common sense that trustees who weren’t financially savvy would ‘know what they didn’t know’, so to speak, and would seek appropriate professional advice.
Both of those arguments are pretty common every time someone raises the idea of a trustee education benchmark. But as with a lot of regulation, the government unfortunately can’t just trust people to know what’s good for them. It’s the same logic behind the rule that only ‘sophisticated investors’[iii] can access certain types of investments, although even that might change given how many people suddenly meet the benchmarks due to rising real estate prices.
Meeting somewhere in the middle
It’s likely that the ideal lies somewhere in the middle. In other words, even if SMSF trustee education isn’t regulated, best practice should be to seek out education. One investment opinion site points out that “Although you’re most likely employing a professional administrator to help you manage your SMSF, you cannot outsource your trustee responsibilities.”[iv] This includes overseeing the investment strategy, even if you’re not the one actually executing that strategy, or even writing the first draft.
In addition to the free courses the ATO offers (hint: you don’t have to wait for an ATO warning to take these cases), you can seek out education on your own terms that meets your practical needs and learning style. SMSF101 offers a range of units, mapped to national standards, that you can take as standalone topics to top up your knowledge. Explore the options here.