Compliance & Regulation

ASIC deems SMSF advice adequate

A diamond being inspected through a magnifying glass.

ASIC finds SMSF advice flaws.

An Australian Securities and Investments Commission (ASIC) examination into the quality of financial advice provided to SMSF trustees has found the majority of it to be of an adequate level.

The “SMSFs: Improving the quality of advice given to investors” report revealed 70.3 per cent of personal advice files provided “adequate” advice, though there were “concerning pockets of poor advice”, where much of the advice involved recommendations that investors set up an SMSF to gear into real property.

There was only one example of general advice provided to an investor and that example complied with the law.

ASIC said it believed there was room for improvement in certain aspects of the advice process.

Problem areas identified tended to involve advice not being sufficiently tailored to the investor’s circumstances. In these situations advisers typically failed to prioritise the goals and objectives of the investor, failed to provide adequate disclosure about product replacement if at all, and did not consider suitable alternatives to an SMSF.

In addition, there was inadequate consideration of the investor’s long-term retirement planning objectives.

The assessment found one of the key issues advice providers needed to discuss with investors interested in an SMSF was the appropriate level of resources required before establishing it.

“Where a fund balance is so low that it makes the SMSF unviable, we expect the advice provider to refuse to set up the SMSF,” the report said.

As a result of the review, ASIC’s SMSF taskforce will focus on enforcement action, policy implementation and continued financial literacy work in the SMSF space, in addition to unlicensed SMSF advice and misleading or deceptive advertising over the next 12 months.

In addition, the corporate regulator will be releasing further research later this year on a qualitative basis to determine whether funds were meeting their original intentions and needs.


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