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ASIC publishes SMSF advice guidance

The Australian Securities and Investments Commission (ASIC) has released two information sheets detailing areas it considers should be covered if advice given to SMSF clients is to be recognised as quality financial advice.

The two documents are Information Sheet 205 “Advice on self-managed superannuation funds: Disclosure of risks” (INFO 205) and Information Sheet 206 “Advice on self-managed superannuation funds: Disclosure of costs” (INFO 206).

Both publications have been made available to provide some guidance as to the types of conversations about costs and risks advisers should be having with clients when contemplating the establishment of an SMSF.

Importantly, the information sheets also include situations that will attract greater regulator scrutiny.

In regard to risks, INFO 205 examines topics such as the insurance cover inside an SMSF, complaint mechanisms of SMSFs and investment strategies.

INFO 205 also covers the appropriateness of different structures, being an individual trustee structure versus a corporate trustee structure. From a compliance perspective, ASIC specified: “We are likely to be particularly concerned if a client has been directed to an SMSF without consideration of the appropriateness of the SMSF structure, or if the client has been directed to a particular type of SMSF structure without consideration of its appropriateness.”

In relation to costs, INFO 206 looks at issues such as advice on the set up, operating and winding up costs of an SMSF, as well as advice on the continued suitability of an SMSF.

However, the most notable inclusion of INFO 206 is the recommendation that in most circumstances a minimum asset balance of $200,000 should exist before an individual is advised to establish an SMSF.

ASIC also detailed situations where it might be appropriate for a person with superannuation benefits of less than $200,000 to start an SMSF, but stipulated: “We are likely to look more closely at advice to establish an SMSF, to consider whether the advice complies with the best interests duty and related obligations, if the starting balance of the SMSF is below $200,000.”

ASIC deputy chairman Peter Kell said: “ASIC wants to ensure that only those investors for whom an SMSF is suitable are advised to establish an SMSF and that our expectations around the standards of advice are clear.

“SMSFs are a key priority for ASIC and we will continue to target inappropriate advice about SMSFs in our surveillance work.”

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