ASIC Thur 18.4.2013, released a report, SMSFs: Improving the quality of advice given to investors (REP 337), outlining its findings from a review into the quality of advice provided in the self-managed superannuation fund (SMSF) sector. The review by ASIC’s SMSF taskforce covered over 100 investor files that were identified as being “higher risk”, eg having a fund balance below id=”mce_marker”50,000 or less diversified investments (eg real property).
While ASIC found that the majority of the SMSF advice was adequate, it identified pockets of poor advice (primarily in relation to recommendations to set up an SMSF to gear into real property). ASIC also found issues in the following areas:
- advice was not sufficiently tailored to the needs and objectives of the investor;
- replacement product disclosure was absent or inadequate;
- insurance recommendations were absent or inadequate;
- an inappropriate single asset class was proposed;
- suitable alternatives to an SMSF were not considered; and
- inadequate consideration of the investor’s long-term retirement planning (and succession planning) objectives.
ASIC Commissioner Peter Kell expressed concern about the apparent rise in aggressive advertisements pushing property purchases through SMSFs. Mr Kell said ASIC does not want to see SMSFs become the vehicle of choice for property spruikers. To this end, he warned that ASIC will take regulatory action where it finds examples of unlicensed SMSF advice or misleading marketing.
The report also contains a number of practical tips for advisers that focus on better explaining to retail clients the roles and obligations of SMSF trustees, the investment strategy, risks, suitability of an SMSF and alternatives. ASIC also expects advice providers to explain that each trustee is liable for managing the SMSF and that there are serious consequences if trustees do not properly fulfil their duties.
Source: ASIC media release 13-081MR, 18 April 2013
[LTN 73, 18/4/13]