Nick Bruining Q+A: Help, I’ve been burned by my SMSF broker! Can I get compensation

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Nick Bruining Q+A: Help, I’ve been burned by my SMSF broker! Can I get compensation

Nick Bruining Q+A: Help, I’ve been burned by my SMSF broker! Can I get compensation

Question

I’ve had a self-managed superannuation fund for three years.

The share broker of my fund told me when we started that I would have no problem in getting 10 per cent a year on my initial investment of $600,000. This has not been the case. In fact, after three years I’ve made no money at all.

There have been many other things that have happened, which I am very unhappy with.

Is this the way that brokers normally operate? Is there a set of standards that brokers need to adhere to by law when it comes to performance?

Based on what has happened, I don’t see this SMSF making any money in the next 12 months. Do I put the money back into an industry fund?

I’ve lost all confidence and trust with other people handling my money.

Answer

I am sorry to read of your circumstances. Brokers and others selling or giving advice on financial products — which includes SMSFs — are required to operate under an Australian Financial Services Licence.

There are a number of factors that would need to be considered in determining if the advice and/or the representations made to you were negligent. From what you have described, I think it is worth following up.

Your first act is to formally complain in writing to the AFSL responsible for the broker’s activities. The contact information for your AFSL is provided in the Financial Services Guide, which would have been provided at your first meeting.

In your complaint, set out what has happened and how you would like the AFSL to deal with the issue. There are strict timelines for them to respond.

If you are unhappy with the response, you can take the matter to the Australian Financial Complaints Authority, which has considerable powers to deal with the complaint, including binding directions to the AFSL for compensation. AFCA is a free service.

In my view, many SMSFs are inappropriately sold to investors and my preferred alternative is a low-cost, public offer super fund which includes “industry” funds, but also a significant number of others.

While I appreciate you have been burned by your experience, the value of good quality financial advice should not be underestimated. Good advisers will focus on the strategies and structures of your existing finances, rather than the sale of financial products.

A starting point to select a good financial adviser is the moneysmart.gov.au website. It provides a process for finding a good adviser.

From there, the two major industry associations provide localised lists of financial advisers. Financial Advice Association Australia is by far the biggest association but the Certified Independent Financial Advisers Association is the group representing legally independent financial advisers.

Independent advisers are prohibited from receiving commissions or having any ownership links to financial products. They are also unrestricted on the financial products they can recommend.

Question

I was born in the Netherlands and came to Australia when I was 40. I am now an Australian citizen, steadily heading to 67.

I will receive a part state pension and an annuity from my previous employer. Together, it’s about €31,000 — or about $50,000.

I am wondering how my entitlements from the Netherlands will be treated for tax purposes in Australia?

Answer

Foreign pensions are treated as taxable income in Australia and need to be declared, noting that the Dutch tax authorities will share your information with the Australian Taxation Office.

Given that many countries’ retirement income systems rely on individual contributions, the ATO recognises those contributions as a return of the capital invested. This money effectively becomes a tax deduction here.

In the case of the Dutch state pension, the “default” tax deduction is 25 per cent of the payment received.

If tax is withheld in the other country, a tax offset for the amount is generally available here, reducing your tax payable.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association

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