Eureka Correspondence

Bare trust set-up costs, FPA accreditation, and selling the Aussie dollar.

Property inside SMSFs

I found Bruce Brammall’s article Is property best inside an SMSF? opportune as I am considering investing in a property within my SMSF.

Although Bruce touched on the need of having to set up a bare trust, he did not seem to take into account the cost of setting up a bare trust in his calculations. I was quoted $10,000, which seems a bit steep. How much would be a reasonable amount to set up a bare trust?

RJ

Bruce’s response: It depends on what exactly was being quoted and by whom. The cost of the bare trust should be about $600 to $1,500. But after that, the quote would depend on what was required to put the structure properly into place and how much work was required to do so.

You might need a corporate trustee for the bare trust (bank requirement generally – about $500-$1,500). If you don’t have one already, you probably need a corporate trustee ($500-$1,000) for the SMSF, as banks generally want one. Was the person quoting including the cost of updating your SMSF deed? Were they providing financial advice to go with it? If an adviser is helping you set up this sort of strategy, then the law says they need to provide you with written advice, known as a Statement of Advice.

I have no idea what your quote included, so I’m only offering some possibilities. I would think $10,000 is a bit opportunistic, but it truly depends on what was included and what wasn’t. It’s not necessarily over-quoting if you needed more than just a bare trust.

Responding to FPA’s letter

I would like to respond to the Financial Planning Association’s recently published letter. It states: “Issues of conduct and behaviour are most effectively addressed through higher education and professional standards which impose obligations that exceed the minimum requirements set in the law.”

Why does the FPA insist on grandfathering the top accreditation of CFP (Certified Financial Planner)? With the exception of the last 5-6 years, all CFP advisers have only completed the equivalent of the Diploma of Financial Planning (DFP). This is extremely misleading to the public.

One of FoFA’s main purposes is to catch advisers who are not actively servicing clients, but it has grandfathered all clients on trail commissions pre-July 2013 – so the very clients that should be empowered are still left in the dark!

Name withheld

Glenn Stevens and the dollar

Over the weekend Alan wrote about how Glenn Stevens was trying to “jawbone” Australia’s currency down. If I were Glenn Stevens, I would be selling Australian dollars to all and sundry for a basket of foreign currencies that reflects our terms of trade. The Swiss have managed to do this successfully. Any time their currency became overvalued as a consequence of being a secret safe haven, to the extent it threatened their internal economy, they sold Swiss francs for foreign currency and made holders pay to hold their Swiss francs.

The immediate reaction of many economists would be to throw their hands up in horror, as this would lead to a huge expansion of the money supply. The monetary expansion would only be a problem if those funds found their way back into the domestic economy. The Reserve Bank has a pretty good idea of the difference between speculative money flows and capital investment flows into Australia, any time those flows exceed investment needs it could quite easily sell accumulated foreign currency reserves it has acquired in managing the currency down.

PD

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