ASIC commissioner Danielle Press

Less than half of 233 superannuation advice files reviewed by ASIC demonstrated full compliance with best interest duty and related obligations, according to a report released by the regulator.

While only 49 per cent of files demonstrated full compliance, 15 per cent of files not only failed to meet best interest duty but indicated the member was at risk of suffering detriment as a result of following the advice provided, the study found.

ASIC Report 639, Financial advice by superannuation funds, was conducted by the regulator to ascertain “the ways in which financial advice is provided to members”. Twenty-five funds were surveyed – 11 retail funds, 10 industry funds, two corporate funds and two public sector funds – but only 21 of these provided personal advice, which the study focussed on.

The primary reasons for non-compliance, ASIC said, were two-fold; the advice provider either failed to identify the subject matter of the advice and the members objectives, financial situation and needs, or they failed to conduct a reasonable investigation into the financial products and base their judgements on the member’s circumstances.

Despite the findings, the regulator put a positive spin on the study, saying in a release the overall quality of personal advice provided to members was “generally appropriate”.

ASIC Commissioner Danielle Press said the result was “pleasing to see”, and noted that the regulator would be chasing down the funds whose advice was putting members at risk.

“Where we did see some risk of detriment,” Press continued, “we will be following up with the advice provider and requiring that they review and remediate the affected member.”

“More broadly, proper oversight of advice fee deductions from superannuation accounts for all advice, not just advice provided by superannuation trustees, is an area of ongoing focus for ASIC working with APRA,” Press continued.

The study pointed out that not all personal advice was provided by the funds, with some stemming from external referrals.

The study also took pains to quell any comparisons between fund types, noting that the compliance rate for retail, industry, corporate and public sector fund types varied within a “moderate range”.

“Due to the different sample sizes, it is not possible to fairly compare the overall quality of advice based on fund type,” it stated. “As such, our findings are aggregate findings and are not broken down by fund type.”

Press confirmed this in the release, noting that it was “not possible” to compare the overall quality of advice based on the findings.

“I know there will be general interest in whether retail or industry funds provided better quality advice,” she added. “We found the quality of advice to be similar across retail and industry funds.”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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