ASIC warns SMSF industry to shape up over advice

Australia’s corporate watchdog has issued a warning to the self-managed superannuation market, saying the industry often fell short of the mark with its risk advice to consumers.

Commissioner Peter Kell from the Australian Securities and Investments Commission said in a speech yesterday the organisation will release a report in the next few weeks detailing its findings into problematic advice.

The SMSF industry has been under the spotlight recently, with the government eyeing off the large number of funds with assets of more than $1 million as a potential source of revenue in the May budget.

Kell said in some cases investors were given advice which was not tailored to their specific situation, or recommendations for insurance were “absent or inadequate”.

“Notably, we also found that investors were not warned about the very real risk of not having access to a statutory compensation scheme in the event of theft of fraud,” he said at the CPA Australia SMSF Conference yesterday.

“Going forward, this will be an area of focus for us. We expect to see advice providers warning investors about this risk.”

Kell said SMSF providers always need to provide advice regarding the roles and responsibilities of being a trustee in an SMSF, the time, cost and resources required to run one and the risks associated with the SMSF structure.

DBA Lawyers partner and SMSF expert Bryce Figot told SmartCompany this morning while the majority of the SMSF industry is fine – a point which Peter Kell himself emphasised – there are “pockets of bad advice”.

“There are plenty of people out there who claim to be experts, and are not experts. It’s hard for the average consumer to know what they’re getting is the real thing, or the accuracy of the advice.”

Figot says he hears stories nearly every day from clients who have received poor, or incomplete, advice. Thankfully, he says, they are sophisticated enough to seek a second opinion.

“While the industry is getting better, there are still people who are not on top of the rules.”

“So the benchmark is improving, but there are gaps in knowledge there.”

Kell also said yesterday if there are widespread losses in the SMSF system, it is likely investor confidence will be eroded – an outcome everyone wants to avoid.

In the next 12 months, ASIC will continue to focus on unlicensed advice and misleading SMSF advertising.

“In the past year, we have seen an increase in the number of advertisements pushing property purchases through SMSFs,” he said.

“We do not want to see SMSFs become the vehicle of choice for property spruikers. Where we see examples of unlicensed SMSF advice, we will be taking regulatory action.”