News

ASIC, Superannuation

SMSF product design obligations hard to police

Moves to have the establishment of SMSFs placed under the product design and distribution obligations overseen by the Australian Securities and Investments Commission (ASIC) would be difficult to police, according to Rice Warner.

In a report commenting on the Productivity Commission’s final report into superannuation, the actuarial firm noted the recommendation was based on ASIC research into the quality of advice provided to SMSFs and not on the adequacy of the current regulation of those funds.

Rice Warner said the acceptance of the ASIC research, which found SMSF advice did not comply with best interest duty obligations and may lead to financial detriment, had led the Productivity Commission to recommend an extension of the product design and distribution obligations to the establishment of SMSFs.

“This would be difficult to police given the individuals establishing the funds are simply setting up a new structure,” Rice Warner noted.

The firm said it was supportive of moves to set a base level of funds for a new SMSF, noting the commission’s observation that funds with less than $500,000 were likely to have higher costs as a percentage of assets.

“While the amount is subjective, it would not be unreasonable to require an SMSF to have (say) $250,000 at establishment,” it said.

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