The industry fund and retail sectors are competing against the SMSF market that is heavily promoted by many accountants and financial advisers. And whilst the factors that draw investors to SMSFs are numerous and diverse, control is a significant one.
One area of control that is attractive to financial and estate planners relates to Binding Death Benefit Nominations (BDBNs). Industry and retail funds typically rely on a “one size fits all” approach involving a form that lacks even the flexibility to have an alternative beneficiary in the event that a nominated beneficiary pre-deceases the member (or is not eligible to receive a benefit).
To compete with SMSFs in this area, industry and retail funds should offer the flexibility in the BDBN Forms to:
- permit the member to nominate alternative beneficiaries in the event that a nominated beneficiary dies (or is not eligible to receive a benefit); and
- permit the member to nominate whether a lump sum or income stream should be paid to the nominated beneficiary.
Better still, funds could provide members with the option of completing a BDBN in a form other than that prescribed by the fund. Even if a small fee is charged to review non-standard BDBNs, this could be very attractive to members and their professional advisers.