The Australian Securities and Investments Commission has provided more detail of the first major project undertaken by ASIC’s self-managed superannuation fund (SMSF) task force.
The regulator recently reviewed over 100 pieces of SMSF advice provided to investors, concluding that the majority of advice was adequate but with pockets of poor advice.
Peter Kell, ASIC commissioner, said the review of investor files relating to the establishment of SMSFs that were provided by financial planners and accountants was not a representative sample and intended as a starting point to examine the more potentially problematic end of the market.
Now the regulator has released a full report of its findings with a number of practical tips advisors can use to improve the quality of SMSF advice.
‘The decision to establish an SMSF is one of the most significant steps an investor can take in relation to their retirement savings. It involves taking greater personal responsibility for retirement investments,” said Kell.
“ASIC therefore wants to make sure those investors can be confident they can obtain good quality advice through gatekeepers such as accountants and financial planners.
“At the very least, investors need to understand the time, resources, compliance obligations and risks associated with do-it-yourself superannuation before moving their superannuation savings out of an APRA-regulated environment.”
ASIC eyes misleading claims
Kell added that ASIC is particularly concerned about the rise in aggressive advertisements pushing property purchases through SMSFs.
“We do not want to see SMSFs become the vehicle of choice for property spruikers. Where we see examples of unlicensed SMSF advice, or misleading marketing, we will be taking regulatory action,” he said.
Commenting on the findings, AMP SMSF head of policy and technical, Peter Burgess, said the regulator’s findings were encouraging given that ASIC’s sample focused on the high risk cases.
“Before considering opening an SMSF, it’s important to get quality advice as an SMSF is not necessary right for everyone,” he said. “AMP supports the views expressed by ASIC in the report that investors need access to good quality tailored advice about SMSFs – AMP has already done a lot work in this area and plans to do further work in the future.
“The advice piece is just one component of an investor’s SMSF journey. Access to specialist and professional administration services is also important and can go a long way to mitigating some of the risks referred to in the report.”
ASIC established an SMSF task force in September 2012 in response to an increase in geared investment strategies, increasingly aggressive advertising and the collapse of Trio and the subsequent Parliamentary Joint Committee on Corporations and Financial Services’ inquiry.
While most advice provided was rated as adequate, there were pockets of poor advice. ASIC found issues in the following areas:
- advice was not sufficiently tailored to the needs of the investor
- replacement product disclosure was absent or inadequate
- insurance recommendations were absent or inadequate
- an inappropriate single asset class was provided to investors
- suitable alternatives to an SMSF were not considered
- inadequate consideration of the investor’s long-term retirement planning objectives.
To read the full report, click here.
