A report from the corporate regulator saying advisers did not demonstrate compliance with the best interest duty in relation to SMSF advice in 91 per cent of the cases reviewed indicates the cumbersome nature of the best interest duty rather than poor advice, according to Lime Actuarial.
Referring to the Australian Securities and Investments Commission’s (ASIC) “Report 575 SMSFs: Improving the quality of advice and member experiences”, Lime Actuarial director Greg Einfield told selfmanagedsuper he questions how SMSF advisers could have failed to meet the best interest duty when their clients were not any worse off following the advice in 90 per cent of those cases.
“To me it’s an indicator that the best interest duty is too cumbersome to deal with and too technical and therefore advisers aren’t meeting it, but their clients are no worse off,” Einfield said.
He pointed out advisers may not have covered off every step required under section 961G of the Corporations Act to meet their best interest duty obligations and documented those steps as stipulated by ASIC.
“I’m going to use a rough term here that the gist of the advice put the client in a better or a reasonable position, but they didn’t go through the motions of dotting every i and crossing every t in relation to this duty,” he said.
He said he fears findings from ASIC’s report and the royal commission into banking and financial services, coupled with new education and professional standards requirements, will lead to more regulation for the financial advice industry, resulting in fewer people willing to become financial advisers.
“And with a growing demand for financial advice we’re at risk of a lot of people not being able to access good advice. I’d like to see more people with SMSFs getting advice,” he said.
“One of the real concerns for me coming out of the royal commission is while I don’t defend for a moment many of the behaviours that we’ve seen, and while many of those actions are indefensible, what you have to be concerned about is that the baby gets thrown out with the bathwater here and that we see even further regulation.
“I think that there are a lot of financial advisers that are trying to do the right thing dealing with a myriad of complex legislation.”
He suggested the solution may lie with advisers using technology to deliver advice more efficiently and cost effectively.
“Using technology is going to be absolutely critical to increase the supply of advice and make it scalable,” he noted.