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”.
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