New ASIC report assesses quality of advice received by investors
ASIC has released Report 337 SMSFs: Improving the quality of advice given to investors (REP 337). The report summarises the findings from the first major project undertaken by ASIC’s Self-managed superannuation fund (SMSF) taskforce.
- ASIC has reviewed over 100 pieces of SMSF advice provided to investors
- Although the majority of advice was adequate, ASIC found pockets of poor advice
- ASIC’s report contains a number of practical tips advisors can use to improve the quality of SMSF advice
Self-managed super funds represent the fastest growing superannuation sector in Australia, with $439 billion assets held by funds.
ASIC Commissioner Peter Kell said ‘ASIC has ramped up its attention on a sector that is of growing importance to more Australian investors. We want to help ensure that we have a healthy SMSF sector.’
‘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. 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,’ Commissioner Kell said.
‘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,’ he said.
ASIC conducted a review of over 100 investor files relating to the establishment of an SMSF that were provided by financial planners and accountants. The files targeted were considered to be in higher risk categories through, for example, having lower balances or less diversified investments.
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, and
- there was inadequate consideration of the investor’s long-term retirement planning objectives.
Commissioner Kell said that ASIC is also 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’.
The focus on the quality of advice provided to investors has been the first major project of ASIC’s SMSF taskforce, and the overarching aim is to ensure that:
only those investors for whom an SMSF is suitable are advised to establish an SMSF. ASIC does not want to see an influx of trustees who are ill-equipped to cope with the responsibilities and obligations of running an SMSF, and
SMSF investors receive good quality advice and services from gatekeepers.
ASIC also emphasised the importance of its ongoing work with other regulatory agencies as well as industry groups in ensuring good quality advice in the SMSF sector.
The report also provides an update on some of the other work ASIC is currently undertaking in the SMSF sector.
ASIC established an SMSF taskforce 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.