A regulatory review of financial advice regarding setting up self-managed super funds (SMSFs) found more than quarter put Australians’ retirement savings at risk.
Australian Securities and Investments Commission (ASIC) Commissioner Alan Kirkland said a risk-based review of 100 financial advice files had identified concerns that 62 files failed to demonstrate compliance with the “best interests” duty, with 27 files raising significant concerns about client detriment relating to recommendations to set up an SMSF.
Commissioner Kirkland said just over a third of advice files, 38 of 100, demonstrated compliance with the longstanding obligation for advisers to act in clients’ best interests.
“People often set up an SMSF because they think it will give them more control over their retirement savings, but they aren’t suitable for everyone,” he said.
“SMSF trustees should be aware of the associated costs, responsibilities and risks. People who move their super from an APRA-regulated fund to an SMSF also lose important protections, including the benefits of prudential regulation and the ability to make a complaint about the fund or its trustees to AFCA.
“Financial advisers who recommend that clients establish SMSFs without properly considering whether it is suitable for their objectives, financial situation and needs, are not helping them take control of their future — they are placing it at risk.”
Commissioner Kirkland said the SMSF sector in Australia was growing, accounting for around $1 trillion of the $4.3 trillion superannuation sector, with 41,980 new funds established in the 12 months to June, an increase from 33,032 the previous year.
He said it was important to maintain high standards of personal financial advice in the context of the growth in SMSFs.
“Collapses like those involving Shield and First Guardian show us the worst-case scenario for what happens when people receive poor advice to switch superannuation funds and make high-risk investments.”
