Speaking at the CPA Australia conference in Sydney yesterday, ASIC Commissioner Peter Kell said a number of concerning findings have come to light as part of the regulator’s investigation into SMSF advice, launched in September 2012.
The taskforce – which is due to hand down a report in coming weeks – reviewed more than 100 files of financial planners and accountants providing advice to SMSF trustees, with a particular focus on elderly and lower-income trustees and funds with a single-asset or under-diversified investment portfolio or less than $150,000 in assets, and rated the advice proffered on a scale of ‘good’, ‘adequate’ and ‘poor’.
“Overall, we concluded the majority of investors in the sample received ‘adequate’ advice, with relatively few receiving ‘good’ advice,” Commissioner Kell said.
“But while the majority received adequate advice, there were concerning pockets of ‘poor’ advice, and much of this advice concerned recommendations to set up an SMSF in order to gear into real property.
“Where this advice was inappropriate, ASIC will be taking follow-up actions and if necessary, regulatory action.”
While the commissioner was clear that the review was not a “representative sample” of the wider SMSF advice sector, but was focused on high-risk funds, he said it is now evident that there has been “a growth in less scrupulous operators targeting SMSFs”.
A number of areas where SMSF advisers have “room for improvement” were listed, including a lack of sufficient tailoring of advice to clients’ needs, absent or inadequate insurance recommendations, investment diversification advice and explanation of SMSF alternatives, or lack thereof.
The commissioner also pointed to “inadequate concern for client’s long-term retirement planning needs” and the importance of explaining to SMSF trustees the benefits of joining a statutory compensation scheme in the event of fraud or theft.
“Dodgy property spruikers” targeting SMSF trustees through midelading advertising and marketing materials are particularly on ASIC’s radar, Kell said, adding this practice will be a key focus of the taskforce going forward.
“We will be cracking down on all gatekeepers doing the wrong thing,” he said. “I don’t want to be speaking to you in five years about what went wrong.”
As housing represents the largest fiscal investment (for most people), it’s about time real estate agents had the same audit and legal controls as does the FP Industry.
Most Real Estate marketing is majority BS, that would put a FP out of business and possibly doing some time.
Been going on for far too long -must be some heavy weight lobby groups protecting the RE industry.
As a financial planning advising SMSF investors I was asked to provide my advice documents as part of this “Crackdown”. But as we didn’t have any clients in their target market, ie. single-asset portfolios with gearing, they didn’t want any of our files. It is therefore not surprising that they haven’t found any “good’ advice, and I’m surprised that the majority were deemed to be adequate.
Glad to hear. Hope they target those who are being encouraged to buy geared, coastal holiday homes for the family use !!!
I hope they tackle the ATO as well,who are one of the main offenders.
-usually due to all the ambiguities they wont clear up
Great comments. I ave been specialising in SMSFs since 1989 and basically bad advice has always been there but usually only from spruikers with vested interests. Crackdown on promotors here for sure as they did with Early Release schemes in recent years.
Honestly, it is not the accountants or genuine financial planners. Just look at the advertisments in every real estate magazine and you can see it is finance brokers that are promoting the one dimensional advice. By no means are all of these guys the problem, just a very obvious select few. ASIC should be calling on them now, not in 2 years time when the damage is even more widespread and they have moved on.
Finally, they are targeting the right areas, especially the “”dodgy property spruikers”. A number of us have been highlighting this practice for a while. Another step to cleaning up the industry.