SMSF Association responds to ASIC SMSF advice report

The release of the Australian Securities and Investments Commission’s (ASIC) Report 575 “SMSFs: Improving the quality of advice and member experiences” and Report 576 “Member experiences with self-managed  superannuation funds” is an important signal to the SMSF sector that the quality of financial advice provided to SMSF members is crucial to the integrity and performance of the sector.

The Reports, based on 28 interviews with SMSF members, an online survey of 457 members and a review of 250 new SMSF client advice files, revealed a number of shortcomings in advice provided to clients within this sample.

“The pockets of poor advice provided to SMSF members are concerning, especially given the important role financial advisers play in assisting SMSF members with their retirement savings,” said SMSF Association CEO, John Maroney.

While the Reports highlighted the need to improve advice practices, the Association notes the high number of files that ASIC viewed as non-compliant did not indicate a risk of financial detriment but attracted the regulator’s scrutiny for not meeting record keeping and process requirements. Similarly, ASIC’s definition of financial detriment to an SMSF member is subjective and is difficult to evaluate without the member’s view being known.

Maroney says inappropriate SMSF advice provided by ‘property one-stop shops’ is of special concern to the SMSF Association. “Where SMSFs are investing in property and using gearing to do so, it is essential that this be considered in a broad retirement savings strategy in the best interests of the individual.”

“The Reports also highlighted that 74 per cent of SMSF members were satisfied with their SMSF, higher than for other superannuation funds, but it is clear that advisers need to make SMSF trustees aware of the obligations and responsibilities of having an SMSF at the outset,” Maroney said. “SMSF advisers should not shy away from scrutiny of the sector but see it as an opportunity to strengthen advice practices. We encourage advisers to read the report and the information ASIC has provided on ‘practical tips’ that can be used to improve advice delivered to SMSF trustees and compliance with the relevant advice laws.”

Maroney said that the Reports have some important findings and recommendations, but it was important to take them in context and remember that there are many SMSF advisers who have already invested in specialist education ahead of any legislative requirements and act in the best interests of their clients by providing trusted and valuable advice.

The SMSF Association will continue to work with ASIC and the SMSF sector to ensure that advice standards improve across the sector, especially through SMSF education.

“The Report has highlighted what the SMSF Association has been calling for over a long period – that advisers speaking to consumers about SMSFs should have specific SMSF education and qualifications underpinning their advice. To that end, we are pleased that in the Report ASIC indicate they support introducing this requirement for advisers.”