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An ASIC review of SMSF services, as part of broader licensee surveillance, found that the overwhelming majority of professionals are failing to fully comply with the Corporations Act.
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Royal commission hears of Corporations Act failure in SMSF advice
16 April 2018
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The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry heard, in nine out of 10 cases ASIC spot-checked at dealer groups and licensees, that professionals are falling short on best interests duty when it comes to SMSF establishment advice.
“The industry as a whole is struggling to get to grips with how to best implement the key best interest[s] duty requirements,” deputy chair Peter Kell told the royal commission.
Key pain points include documentation in advice files, consideration of existing products when recommending a new fund is set up and poor audit processes.
In particular, Mr Kell fears remediation processes for clients could be compromised by poor documentation processes. ASIC has been firing warning shots about statements of advice, in particular, for several months.
“The case with remediation processes in the past is they are more difficult to implement where record-keeping is poor,” Mr Kell said.
“It’s not simply a matter of just record-keeping. If, for example, there are disputes between clients, an adviser and a licensee, ensuring the reasons why the client received the advice they did is on file and set out is critical,” the deputy chair added.
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Adequately considering existing insurance held in superannuation prior to switching clients over to an SMSF remains a problem, Mr Kell said, and one that ASIC has actively penalised advisers for.
Further, advice related to property investment and “one-size-fits-all” advice is also of concern for ASIC.
Despite his fighting words, Mr Kell said consumer detriment as a result of this poor advice is of a smaller magnitude.
“It is very disappointing, to say the least. I should note that for the majority of those files, there is not necessarily an indication that there is immediate consumer detriment,” Mr Kell said.
“There’s a smaller percentage where we think that is apparent.”
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