The SMSF Association has acknowledged the significance of the corporate regulator’s recent SMSF reports, but noted most non-compliant client advice files did not indicate a risk of financial detriment.
Responding to two Australian Securities and Investments Commission (ASIC) reports released last week on SMSF advice quality and member experiences with SMSFs, the association said while the reports stress the need to improve advice practices, only a small number of non-compliant files indicated a risk of financial detriment, with most files attracting ASIC’s concern for not meeting record-keeping and process requirements.
The association also said ASIC’s definition of financial detriment to an SMSF member is subjective and difficult to assess without knowing the member’s view.
However, association chief executive John Maroney acknowledged the reports revealed substantial shortcomings in advice provided to clients within the sample used for the research.
“The pockets of poor advice provided to SMSF members are concerning, especially given the important role financial advisers play in assisting SMSF members with their retirement savings,” Maroney said.
He said inappropriate SMSF advice provided by property one-stop shops is of particular concern to the association, emphasising that when investing in property and using gearing to do so, it is vital to consider it as part of a broader retirement savings strategy in the best interest of the client.
“SMSF advisers should not shy away from scrutiny of the sector but see it as an opportunity to strengthen advice practices,” he said.
“We encourage advisers to read the report and the information ASIC has provided on practical tips that can be used to improve advice delivered to SMSF trustees and compliance with the relevant advice laws.”
ASIC’s “Report 575 SMSFs: Improving the quality of advice and member experiences” also said the regulator had found an unacceptable level of poor-quality advice, which showed a need to increase education and training requirements for SMSF personal advice providers.
Maroney said he is pleased with this proposal, adding the association has long been calling for SMSF advisers to have specific SMSF education and qualifications underpinning their advice.
The Financial Planning Association (FPA) also responded to ASIC’s reports, saying it will develop training and support for members advising on SMSFs.
It welcomed the practical tips set out by ASIC around the roles and obligations of SMSF trustees, risks of an SMSF structure, alternatives to an SMSF structure and record-keeping, and encouraged financial planners giving SMSF advice to include them in their advice practice.
FPA chief executive Dante De Gori said: “There is no doubt that these results will focus the efforts of code-monitoring bodies, once approved, on the proactive supervision of SMSF advice.
“This is a growing sector and good advice is imperative to ensure the best outcomes for those who choose an SMSF as the vehicle to manage their retirement savings.”
