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SMSF Financial Advisers need to do better

Friday 29 June 2018

Alerts from ASIC 

Of the 250 randomly selected files the Australian Securities and Investments Commission (ASIC) Indicated that 91 per cent files failed to meet the ‘best interest’ duty.

According to an official statement from the corporate regulator 10 per cent of the files reviewed showed that the clients would be significantly worse off due to financial advice and 19 per cent of the cases reviews that regulator indicated that they were at risk of significant financial detriment due to the financial advice.

“A healthy and robust self-managed super funds (SMSF) sector is an important part of our super system. However, it is clear lots of people are setting up self-managed super funds without knowing whether this is the best option. The financial advice sector has significant work to do to lift their performance on this issue,” Peter Kell, Deputy Chair of ASIC said in an official statement.

Decisions about Superannuation
Separate to this, market research indicated that a large percentage of people do not understand risks of (SMSF).
According to the regulator:

  • 38% of respondents found running an SMSF more time consuming than expected; 
  • 32% found it to more expensive than expected; 
  • 33% did not know the law required an SMSF to have an investment strategy; and 
  • 29% mistakenly believed that SMSFs had the same level of protection as prudentially regulated superannuation funds in the event of fraud.

“Decisions about super are some of the most important a person can make. However, ASIC found there is a lack of basic knowledge of the legal obligations in setting up or running an SMSF. It is also concerning many people with an SMSF have not understood the importance of diversification, which puts their financial future at risk,” Kell said.
The report SMSFs: Improving the Quality of Advice and Member Experiences can be read