The Cooper Review highlights separately managed accounts (SMAs) as an appealing platform for SMSFs, and has challenged the industry to come up with fresh answers on how SMAs can be adopted widely.

The issues paper released yesterday highlighted the tax effectiveness of SMAs and how they allow new members to run an investment account that they can trade in and out of much more easily than with a large fund.

The industry body for managed accounts, the Institute of Managed Account Providers (IMAP), welcomed the inclusion of SMAs in the super system review and IMAP chair Toby Potter said IMAP will be making a submission on why SMAs are critical to SMSFs.

"We regard this as a ringing endorsement of the benefits which managed accounts deliver for SMSF members…the Review also notes the benefits of electronic trading which managed accounts generally provide," he said.

Arthur Naoumidis, group managing director of SMA provider Praemium, said that the Review, however, shows some of the popular misconceptions on how SMAs work when the recommendation was worded to mean that SMAs can be used as an alternative to SMSFs.

In fact, SMSFs can use SMAs as an investment vehicle for direct equities, managed funds and a host of other financial assets but the SMA itself doesn't have the compliance admin built-in. SMSF holders then use a separate accounting software that does all the super-related compliance for the SMAs and other SMSF-related legislation.

Still, Naoumidis said the message is that managed accounts can be used to increase the admin efficiency, tax effectiveness and flexibility of running investments within SMSFs.

He said the industry is already working on a super SMA, or a managed account that will have the compliance built-in to the vehicle.