The Australian Securities and Investments Commission has handed down its much-anticipated report detailing the findings of its investigation into professional advice in the self-managed super fund sector.
The report follows an eight-month investigation into advice given to SMSF trustees – with a particular focus on cases the regulator deemed likely to be high-risk – and found that while “the majority of advice provided was adequate, there was also room for improvement in aspects of the advice-giving process”.
Through its review of more than 100 investor files, ASIC found “concerning pockets of poor advice” and many of these cases involved SMSFs being used as a vehicle through which to gear into real property.
Almost one-third of the personal advice sample files reviewed (28.4 per cent) were found to be “poor”, while 70.3 per cent were found to be reflective of “adequate advice” and only 1.3 per cent was considered “good advice”.
“Given the risks associated with a DIY option, we think there are certain things advice providers and investors need to discuss and consider before setting up an SMSF,” the report states.
The report contains a checklist for advisers to use when determining the suitability of an SMSF for a client, which includes considerations of whether the client has sufficient financial knowledge and understanding, whether they fully understand “the time and cost required” to run an SMSF and the basic skills and understanding of inherent risks to make necessary investment decisions.
It also calls on advisers to make sure clients who are leaving an APRA-regulated fund to an SMSF structure are clearly aware of the advantages and disadvantages of both systems.
As well as its findings on SMSF advice, the report announces ASIC is “taking enforcement action to protect SMSF investors and stop unlicensed SMSF advice and misleading advertising”.
Great work – no if you could just get accountants to stop giving ” advice” to set up smsf funds with term deposits and cash as the only assets to fee gouge, then the committee would have done its job.
No-one is asking the basic question – why does ASIC think they are qualified to review any financial advice given by anyone. In my experience ASIC staff are lowly paid public servants who can’t get a real job in the private sector. They wouldn’t know good advice from bad. Why do we pay attention to these fools?
Only 1.3% of sample rated ‘good’ advice, and nearly a 3rd rated ‘poor’.
If this was the result for the dispensing of advice from other professionals, such as medical practitioners to their patients, it would be the lead story on all news and pollies would be demanding a royal commission. But because it’s ‘only’ super, it’s tolerated???
One important aspect of the findings—everyone is perceiving the advice is from a financial planner–no mention of whether the planner is CPA CA CFP AFA IFA etc, thus the perception is FPA or IFA. SMSF’s need specialist advice-true, dealer groups “enforce” accreditation but there are those planners-accountants included, not accredited and offer both good advice but unfortunately BAD advice. ALL professional bodies need to work together to ensure all members are working on the same page
Should be noted that it may well be, in the majority of cases, that accountants are the advisers on borrowing in SMSF rather than financial planners
dealer groups & ASIC shoold only allow advisors who accredited specalists in SMSF(SPAA) to advisor in Super, overnight this wolud reduce the problem
Yeah, yeah, yeah……. Until the ATO/ASIC do what they are meant to do and prosecute an accountant and SMSF trustee who have made breachs such as, loaning money to the accountants son via the SMSF (with no agreement) or using the SMSF to fund general living costs etc. This sector is going to continue to be uncompliant. Unfortunately some SMSF trustee and accountant need to be fined / taxed to the full letter of the law and held up as an example.
What a joke! 100 client files out of how many inappropriate SMSFs? Eight months to discover the bleedin’ obvious? What next; another task force to determine the colour of the sky? Who’s paying these clowns?
Tip of the iceberg.