ASIC has released proposed guidance to improve the quality of SMSF advice given to investors, specifically the need for better disclosure requirements in relation to establishing an SMSF.
As part of its continuing focus on SMSFs, the corporate regulator has released “Consultation Paper 216 Advice on self-managed superannuation funds: Specific disclosure requirements and SMSF costs” (CP 216), which contains proposals to impose specific disclosure obligations on advisers.
CP 216 included the need to warn clients that SMSFs did not have access to the compensation arrangements under the Superannuation Industry (Supervision) Act in the event of theft or fraud and also explain other matters that might influence a client’s decision to set up an SMSF.
Given the strong growth of these funds, ASIC deputy chairman Peter Kell highlighted the importance of good-quality advice for SMSFs.
“When it comes to planning your retirement, establishing a SMSF is a very significant decision,” Kell said.
“We want to help ensure that the SMSF sector is healthy and that investors make informed decisions about SMSFs.
“Our recent surveillance of the sector found that the advice was not up to a standard we would like, so we will continue to work with the industry to ensure investors receive good-quality, tailored advice from their accountant or financial planner.”
CP 216 also looked at the appropriate level of resources consumers should have before setting up an SMSF.
ASIC commissioned Rice Warner to examine the minimum cost-effective balance for SMSFs when compared with super funds regulated by the Australian Prudential Regulation Authority (APRA).
The regulator was seeking feedback on the Rice Warner findings and on the costs associated with setting up, running and winding up an SMSF.
“Through our consultation, we are looking to encourage further discussion and explore the issues relating to SMSF costs with industry and consumer stakeholders,” Kell said.
“We think that understanding the costs associated with having a SMSF will help advisers and their clients consider whether a SMSF is a cost-effective option when compared with an APRA-regulated fund.
“ASIC does not want to see an influx of trustees who are ill-equipped to cope with the responsibilities and obligations of running a SMSF.”
In September last year, ASIC established an SMSF taskforce to focus on the risks in the sector, including potentially inappropriate geared investment strategies, increasingly aggressive advertising and investment fraud.
This was the taskforce’s second major project and had the overarching aim to ensure that only those investors for whom an SMSF was suitable were advised to establish an SMSF and investors received good-quality advice and services from gatekeepers, such as accountants and financial advisers.
