In response to an increase in marketing that recommends switching from retail and industry funds to SMSFs to invest in crypto, ASIC said that individuals should not rely on social media ads or online contact promoting an “investment opportunity” or “high return” portfolio.
“Setting up an SMSF is one of the most significant decisions you can make relating to your retirement savings,” ASIC said.
“Before making the decision to set up an SMSF, seek advice from a licensed financial adviser.”
In particular, individuals should be wary of cold-calling, text messaging and emails that recommend transferring super to an SMSF or investing in crypto assets via their SMSF.
“Australians who decide to self-manage their super should consider the risks before using their SMSF to invest in crypto-assets,” ASIC noted.
“As the trustee of your SMSF, you ultimately bear responsibility for the fund’s decisions and for complying with the law even if you rely on other people’s advice – licensed or otherwise.”
ASIC noted that there were rules governing what investment an SMSF can make and taxation consequences for investments including cryptocurrencies.
Investments must also be permitted under the fund’s trust deed and be in accordance with the fund’s investment strategy.
“When developing and reviewing your investment strategy you need to document how your fund’s investments will meet your retirement goals having regard to diversification, the risks of inadequate diversification, liquidity and the ability of the fund to discharge its liabilities,” ASIC said.
The regulator pointed to its own website, Moneysmart and the ATO website as providing resources for information about scams, crypto investments and SMSFs.
This is a major risk imposed by the regulator on advisers. AFCA continues to use the crystal ball to determine settlements when an adviser makes a recommendation that either under performs or the one they left outperforms
In some circumstances AFCA may even hold the adviser liable under the crystal ball if the adviser discouraged such an investment if in fact Bitcoin rises dramatically .
I cannot see many advisers encouraging crypto for an smsf or the larger AFSL allowing it, but small one man band AFSL where the adviser is the investment committee may be inclined to justify this.
That ASIC ask us to provide advice on a “product” that has no basis for valuation, no PDS, no anything, and that “don’t do it” is also advice, PLUS the fact that none of us can give any advice on this product due to our Licensees rules (which appear to be stricter than ASICs, as they are now effectively telling us to give advice on crypto)…
The mind boggles.
There is no legal restriction in advising on crypto. However for most licensees there are risk management restrictions, part of which are driven by PI insurers unwilling to share that risk by insuring it. Double gearing and derivatives trading are treated similarly by most licensees.
The simple answer to any client inquiry about crypto is… “Sorry, I can’t help you. My licensee has determined that crypto is a product that is too high a risk for us to be involved in advising on.”
No advice has been given, but hopefully they get the message.
As they are not an approved product or one where we could get decent research, I would struggle to make any recommendation on any crypto asset. I can only advise SMSF clients on how to meet their compliance obligations if they proceed and not on the suitability of the asset. I understand what the regulator is trying to do but trying to push people towards financial advisers for advice on aquiring crypto assets is only going to lead to disgruntled investors when we say we can’t advise on them.
There is a fairly standard pitch used by spruikers of dodgy investments… “Don’t take any notice of what your financial adviser says because they don’t understand it and they don’t make any money from it”.
Crypto spruikers are following a well worn path.
Crypto providers at the moment don’t pay for PD days, conferences. They don’t allow Directors of licensee’s to hold shares in their companies or platforms and hence Advisers can’t recommend them yet. When this happens they’ll be on APL’s and advisers will be able to recommend them. It will take some time for License’s heads to work how to get a slice of the action.
alternatively they have no way of being valued and therefore a rational adviser can’t recommend them.
Astounding that the industry regulator has no idea that due to the licensing regime, compliance etc, that no adviser in Australia can advise on Crypto. This just highlights to me that they have no idea how the industry works, otherwise they would have known.
Exactly what I was thinking.
Wow so much mis information on both sides , if you are an experienced investor and spend at least 30 hours to DYOR do it , don’t listen to Asic and financial advisors or Google adds , Read to the investing books and well researched reports like messari
Outflows from Industry Super stirred the beast (ASIC) – rest assured I reckon – ASIC is always watching FUM flows.
Any data to support this theory, or are you still hoping Industry funds will go belly up with the Covid withdrawals from last year?
I remember that Covid liquidity scare – didn’t the Industry Super funds cry over that one. It was like taking candy from a child (FUM from a Super Fund). I seem to remember the Real Estate agents were the ones to blame for that one?
Luckily it seems many of the Trustees managed to get their investment switches in before the change in valuations.
Th one organisation that can stop this practice is ASIC but they issue a press release, the people doing this must be shaking in their boots. Also no adviser can recommend Crypto so we can’t provide advice for someone who wants to establish an SMSF and invest into Crypto.
We can advise on crypto, but just because we can, doesn’t mean we will. I can’t ethically advise a client to invest in something I never would. Sadly this results in some clients deciding to go it alone, I just try to highlight the risk and ask them to only invest funds they can afford to lose.
I’m happy to advise on Crypto. My advice will be “Don’t do it….. If you pay me for advice on setting up a fund to invest in crypto my advice will be …. “Dont’ do it”. If you want to gamble go to casino as the lights are more fun and the music better and you migh score a not so free drink if you lose enough. So yes ASIC is correct get advice on setting up your SMSF before you do it and be advised “Don’t do it” .
But “don’t do it” is still advice. You would require research, alternative product fee comparisons etc.
Don’t get me wrong, it’s the “right” thing to do, but ASIC and your Licensee could then sack you for not meeting safe harbour provisions.
That’s why ASIC asking clients to seek advice from us shows that they don’t understand the red tape nightmare they have created.
Crypto is not a financial product. And if it were we can still give class of product advice based on the fundamental risks of the asset class and why it’s not appropriate to the client meeting their goals. I’m not disagreeing however that current financial service regulation hinders client focussed advice in many circumstances.
Does your insurer know that you can advise on Crypto!?! Or are you saying that you ‘have the ability to’ but refrain from advising on Crypto, so no need to be insured for it? If your insurer hasn’t directly covered you for crypto, then you cannot advise on it. So it begs the question: if you are covered by insurance and paying a massively inflated premium, yet not providingh advice in this space, then why are you covered in the first place?
There are no licencees that will allow their advisors to give advice on crypto currencies, and if the firm is self licenced thhey are never going to give advice on crypto either as when the client makes a loss, ASIC will be after the advisor – even if they said no crypto is not a safe or good investment for you. as the client will say they did not understand that the advisor was telling them no.
High risk asset, yes. You always get that with innovation. People fear what they don’t understand. Most advisers don’t understand the crypto market are ignorant to the opportunity anyway so getting advice from advisers is laughable to say the least.
our Professional Indemnity Insurers won’t allow us to give advice on Crypto. it’s not the advisers fault.
Given there are only two PI companies operating in Australia, I suspect it’s your licensee that won’t put it on the APL, (it doesn’t suit their agenda)….. the Insurer will only cover you for anything on the APL.
Your point being?? As you state, ‘there are only two PI companies in Australia’, so there is no competition, making it even harder to get crypto advice covered. Yes your insurer will only cover your APL …. but there will be a premium for exotic assets on your APL. What don’t you get?
I understand that the point you’re trying to make is that Licencees don’t yet have a product provider incentive to have crypto on an APL; fair enough, but completely misses the point that ASIC cannot today ask us advisers to provide advice on something we cannot provide advice on!
You do realize that telling a client not to invest is advice
Glad you get my point. So people commentating should say my licensee prohibits it, and I’m restricted in someway, rather than saying I can’t advise on it…there’s a big difference. same same but very different. Most Advisers are conflicted. A bit like AMP only recommending AMP products isn’t it? ….or now Hub24 in order to get cheaper rates. Have to be a large holding in Crypto before your premiums went up.
The reason PI insurers won’t cover crypto is because the risks associated with it are far too high. Just like life insurers not covering abalone divers or racing car drivers.
ASIC loves the headlines rather than chasing the unlicenced operators – adverts everywhere !!!! click on crypto in google and wait for adverts that magically appear on your searches.
Does anyone at ASIC understnad what on earth they are doing. CRPTO is a wild west show. Heck I can create my own CRYPTO currentcy with software available. Governments wolrdwide are scrambling to regulate this as they should yet we have nitwits in ASIC say….get advice. Which AFSL and or adviser wants to go down into a jail cell. ASIC are incompetant ….again. Yeah…surprise surprise…
You’re absolutely right that you can create your own cryptocurrency. You can also print pretty good counterfeit US notes as well, with the right equipment.
Facetiousness aside, even if you were to create your own cryptocurrency, would you be able to get the network effects and backing of the 2 largest cryptocurrencies by volume (being Bitcoin & Ethereum)? This is where the value comes from, not just from you copying some source code and releasing it into the wild.
From your post, it appears that you haven’t done any research on the subject. I’d suggest looking into this a bit further, as there’s more than meets the eye when scratching the surface….
Yet we can’t advise on crypto!!
What adviser, in their right mind, is ever going to sit down and assess the suitability of a client establishing an SMSF for the purpose of investing in Crypto and determine that ‘yes, this is a good idea for you you should establish an SMSF’.
If ASIC was serious, they’d go after the unlicensed operators instead of ‘encouraging’ people to seek advice.
Probably a forward-thinking adviser who can see that what started as an experiment for cryptographers and cypherpunks has now reached the stage of legitimacy, and shows no signs of slowing down.
It’s certainly not a wise idea to establish an SMSF for the sole purpose (not to be confused with the SIS act definition) of investing in crypto, although the same could be argued for investing 100% of the fund in a single direct property, which is what a lot of spruikers are still doing. However, holding a smaller percentage – perhaps 5%, and no more than 10% – is likely a wise idea. If it all dies in a heap (which is highly unlikely at this stage), then you’ve lost a small percentage of your fund. However if it does really well, then you’re on a winner.
Mr. ‘open your mind’ Tattslotto tickets and online gambling share the very same similarities as you outline for crypto; if you’re still a practicing Adviser it just goes to show the stupidity of the FASEA Exam!
Mr (or Ms) Mouse; other than investing in the latest ‘fad’ or meme cryptocurrency, they are very very different, and contain properties that make them better money than our current systems. Either do some significant research on the subject, or keep quiet about it. It’s easy to form an opinion when you don’t have all of the necessary information.
Nope, I am no longer a practicing adviser, as I found the red tape and personal liability to be far too onerous (and no, I wasn’t recommending or suggesting crypto assets to clients, before you bring this up). I did, however, pass the FASEA exam first time, and was in one of the first sittings. Deciding to educate myself about cryptocurrency and passing the FASEA exam are two entirely different things and should not be conflated.
I agree. I am setting up an SMSF with a small content of Crypto and a strategy around this. Whilst the majority of the fund investments are traditional in the approach. There are Crypto ETF and funds like Holon that are dealing with Web 3 opportunities. I have found that the clients are already involved in Crypto outside of super. Super is advantageous for the realisation of assets along with contribution opportunities created with profits realised in Crypto outside of super.
Agree. ASIC again taking the soft option as opposed to regulating the unlicensed operators.
But if a licensed adviser missed a full stop on a SOA…………….
This is news to me…. are most licensed financial advisers able to advise on crypto in the first place?
I left the industry a year or two back, but at that time the AFSL was screaming no
not a hope
And which adviser would be willing to take the risk of providing advice on an asset class such as crypto….