The SMSF Advisers Network (SAN) has spoken out about the recent licensing restrictions placed upon it by the Australian Securities and Investments Commission, noting that it benefited from the interaction.
“We anticipated that ASIC would be interested in SAN given the growth in adviser numbers we experienced in a short period of time,” stated Seamus Fennelly, the licensee’s director and compliance manager.
ASIC announced last week that SAN had agreed to “additional conditions”, which require the licensee to “engage an independent expert to review and test the compliance of advice provided by SAN’s advisers”.
Further, the regulator stipulated that the external reviewer must “assess whether SAN has appropriate supervision mechanisms in place to ensure that its advisers are meeting the best interest duty and related obligations”.
In an email response to Professional Planner, Fennelly stated that SAN had made a head start on the regulator’s control measures.
“SAN has already made amendments to its systems and processes to address ASIC’s concerns,” Fennelly noted. “These amendments were implemented prior to SAN consenting to the additional licence conditions.”
An industry wide issue
The licensing conditions were imposed after the regulator conducted surveillance of the SAN’s activities due to a significant increase in the number of advisers the AFSL holder secured since 2016.
While ASIC’s initial focus was on licensee policies and procedures, red flags were raised as it found that “some of SAN’s advisers had failed to demonstrate compliance with the best interest duty and related obligations,” according to the regulator.
Concerns were raised that the SOAs provided by SAN were not sufficiently detailed or specific to the client’s situation.
“ASIC found that the statement of advice (SOA) documents relied heavily on templated wording and many of the client files lacked evidence to support the advisers’ recommendations that clients establish a SMSF,” the regulator stated.
Fennelly stated that templated SOAs are an “important risk management tool”, and called its application an “industry-wide issue”.
“SAN continues to work with our advisers on tailoring SOAs,” Fennelly noted.
According to the ASIC register, SAN currently has approximately 1048 advisers on its books, up from 738 in April, 2017 and only 33 in April, 2016. It is the fifth largest licensee in the country by numbers, and should rise to number four once the NAB/MLC split takes effect.
Owned and operated by the National Tax and Accountant’s Association (NTAA), SAN was set up in 2016 to provide limited licensing provisions to accountants so they could service clients in relation to self-managed superannuation fund needs.
The SAN website states that its authorisation “will allow members to advise clients not only on the set-up of an SMSF but also the change to pension, the establishment of LRBA structures as well as specific contribution levels, rollovers and the provision of an asset class investment strategy based on the individual member’s investor risk profile.”
In its announcement, ASIC reiterated that financial advisers are “required to adequately demonstrate why an SMSF is appropriate for the client and why it is in the client’s best interests”.
“ASIC expects financial advisers to use their skills, expertise and judgement in determining whether an SMSF is appropriate and not rely solely on client direction,” the note continued.
Fennelly noted that SAN is already addressing ASIC’s concerns and is grateful for their guidance.
“We continue to be open to working with ASIC and we appreciated their engagement as it gave us more clarity around their expectations,” he said. “Our AFSL and our advisers have benefited from this process.”