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The FAAA welcomes the release of ASIC Report 824. The report has highlighted some concerning instances of SMSF advice, and it’s an important reminder that while SMSFs can be a great option for people looking for greater control and more flexibility in their superannuation, they are not for everyone.
It’s very important to bear in mind that this report was targeted towards areas of SMSF advice that AISC has assessed as high risk, focusing on 12 advice licensees. ASIC has said that the report is not intended to be representative of the financial advice sector more broadly.
It’s also the case that only about 25% of SMSFs are currently advised. This report does not cover consumer outcomes in the much larger unadvised segment of SMSFs.
That said, the report’s key findings address flaws in some particular areas of advice:
- The goal of control being important to the client without clarifying what control was already available to the client in their current fund.
- The danger of losing insurance coverage that might have been available in the previous fund, but wasn’t replaced as part of the transfer.
- Clients’ interests not being prioritised, particularly in some instances involving Limited Recourse Borrowing arrangements to acquire off-the-plan properties.
- Failing to adequately consider the clients’ circumstances including their age, capacity, super balance, understanding of the greater risks in the SMSF space and ability and willingness to take on the trustee role.
The report also provides useful pointers for financial advice licensees to support their obligations around record keeping, monitoring and supervision and effective policies and procedures for managing conflicts of interest.
