Promoters of self-managed super funds (SMSF), such as accountants and financial advisers, should have to inform clients of the loss of protection when a member shifts from an Australian Prudential Regulation Authority (APRA) regulated fund to an SMSF, according to Tria Partners.
"Ideally [promoters] should obtain a signed acknowledgement from the member accepting this risk," said Tria Partners managing partner Andrew Baker.
Fraud is a significant issue for the SMSF sector, Baker said, and the recently released final report of the Parliamentary Joint Committee into the collapse of Trio Capital sheds some light on the amounts involved.
The total amount lost to investments in Trio was about $176 million, relating to 6,090 investors.
Of that amount, $121 million related to 415 apparently non-super investors and 285 SMSFs.
"The report does not allocate losses between these two groups, but the implied average loss is about $175,000 - suggesting SMSF losses in the region of $50 million," Baker said.
"If we take Trio and add on just what makes the press, we must be looking at SMSF fraud costs of $70-100 million," he said.
The PJC report recommends that the Australian Taxation Office publish warnings on its website and in guidance material highlighting the fact that SMSF investors are 'off the reservation' - meaning that, in the event of fraud, there are no prospects of compensation.
"It is clear from investor submissions that many had no idea of this," Baker said.
He also said that APRA-regulated funds should do more to emphasise the protection from fraud that they offer members.
"For collective funds searching for strategies to hold back the SMSF tide, protection from fraud is a largely unappreciated benefit which they could do much more to promote as part of their value proposition," he added.
