WHEN members of self-managed super funds lose money due to theft or fraud, they are on their own. While members of large super funds are eligible for the government compensation scheme, the only recourse for DIY super funds is costly civil action in the courts. That's a gap in the market that Rainmaker Group, a financial services information company, aims to close with its SuperGuard360 service.
The service is designed to help safeguard DIY fund trustees against fraud and theft or misconduct and to hold their hands if something goes wrong. Rainmaker managing director Christopher Page says SMSF trustees are particularly vulnerable to fraud and misconduct because they are acting independently.
"In recent years, a number of government reviews and independent research reports have highlighted the vulnerability of superannuation funds, and specifically SMSFs, to misconduct and deceptive behaviour," Page says.
"In addition, perpetrators are becoming increasingly sophisticated in their approach. Greater control doesn't have to be at the expense of your peace of mind."
The cost of SuperGuard360 is just under $700 a year for funds with up to $1 million and just under $1000 for those with more than $1 million.
It is not that expensive. It works out about 0.14 per cent on $500,000 and 0.067 per cent on $1.5 million.
The trustees tell Rainmaker which investments they have and which service providers, such as administrators, accountants and financial advisers, they use. Any problems with these are flagged.
If fraud or misconduct occurs, the trustees are supported through the mediation. If the mediation is unsuccessful, the trustees are given help to obtain litigation funding.
SuperGuard360 is not insurance. However, if mediation or litigation fails, a wholly owned subsidiary of Rainmaker, Professional Standards Mutual, will, at its "discretion", provide compensation for losses.
The product does seem to have a high "trust" factor.
The Professional Standards Mutual (PSM) will not be seeded with money, but funded on a needs basis from the rest of the Rainmaker Group.
"PSM will fund any payment made to members in its discretion and gives no undertaking or representation that the extent of any payment will be equal to the total loss suffered," the marketing document says.
DIY super funds mostly invest in big Australian-listed companies and cash, where the likelihood of fraud is very low.
Misconduct is more likely with, say, a property developer, for example, or some type of investment scheme or arrangement that is unlikely to be covered by Rainmaker or any other researcher for that matter.
Sophisticated investment fraud is very difficult to detect.
I do not know if the SuperGuard360 service is any good or not, but the concept is worth considering.
SuperGuard360 may well offer peace of mind, but is that peace of mind worth paying at least $700 a year for – it could be. But that's the question any trustees thinking of buying this service should ask themselves.
Sydney Morning Herald