The SMSF Association has backed the draft legislation stemming from recommendation 22 from the banking royal commission that will make the hawking of financial products illegal, stating it will improve the integrity of the sector.
The SMSF industry body used its submission to the Financial Services Reform Task Force to endorse the proposed legislation, noting financial products should only be offered to an individual when they have made an inquiry about the offering to improve their financial well-being or while actively seeking advice.
According to the association, this piece of legislation will have a positive direct effect on the sector it represents.
“Prohibiting the hawking of financial products has the potential to be an extremely effective measure to prevent property spruikers using SMSFs in a ‘one-stop property shop’,” SMSF Association chief executive John Maroney said.
“This advice model typically occurs when a property spruiker sources a property, organises financing and a client’s SMSF accounting and audit services either for a commission or ongoing fees.
“These businesses have inherent conflicts of interest, lack specialised advice and SMSF skills, and take advantage of customers with limited knowledge of SMSFs. Property seminars are the main source of this unscrupulous behaviour.
“This is clearly a ‘hawking’ procedure. We believe an individual attending a property seminar doesn’t expect to be offered a superannuation product and, in these circumstances, it’s unsolicited and therefore should be prohibited.”
Maroney noted the association has been concerned about property spruikers for a long time. And while he offered his support for the draft legislation, he warned it should not impact on the provision of genuine financial advice.
“It’s important we don’t throw the baby out with the bathwater. We fully support draft legislation that limits the ability of property spruikers to hawk superannuation products, but still allows financial professionals to provide SMSFs as a superannuation option where appropriate,” he said.
