ASIC, financial advice

Greater clarity from INFO 274

INFO 274 SMSF advisers

ASIC Information Sheet 274, which provides guidance on the provision of SMSF advice, should give advisers more certainty when discussing fund set-ups.

A technical specialist has noted the recent release of Australian Securities and Investments Commission (ASIC) Information Sheet 274 (INFO 274), an update of its guidance regarding SMSF advice, is a move that will create more clarity for advisers over fund establishment recommendations.

BT SMSF strategy national manager Neil Sparks said: ““INFO 274 is a positive step for the SMSF community. It removes the confusion about whether financial advisers can recommend the establishment of a new SMSF to clients with less than $500,000 in their super.”

Sparks pointed out that while the updated guidance no longer contains a suggested minimum balance for SMSF establishments, it contains useful case studies to which advisers should refer if a client has a lower superannuation balance and is considering setting up an SMSF.

More importantly, practitioners should acknowledge ASIC’s position reflected in the examples that the member’s asset balance is only one factor when determining if an SMSF should be established for a client, he said.

He acknowledged INFO 274 also covered off other key considerations advisers should be raising with potential SMSF trustees, such as the comparative risk involved when compared to an Australian Prudential Regulation Authority-regulated super fund.

To this end, the guidance states practitioners should address the different consumer protection channels available and the consequences stemming from changes in a person’s life circumstances.

“Scenarios that advisers may wish to run through with clients are the impact on the trustee-member relationship following a potential marriage separation or divorce. Related to this, if members leave, the fund’s illiquid assets may need to be sold,” Sparks suggested.

In addition, he recognised the guideline highlighted the need for advisers to properly educate clients about the fund investment strategy, including concepts such as portfolio diversification, and for them to ensure potential SMSF members have an understanding of the difference between an individual and corporate trustee structure.

The costs involved and the time needed to run a superannuation fund were other key discussion points the new information sheet raised, he said.

INFO 274, released on 8 December, consolidates and replaces Information Sheet 205 – Advice on self-managed superannuation funds: Disclosure of risks and Information Sheet 206 – Disclosure of costs.

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