ASIC has found that 10% of SMSF set up advice is likely to leave people significantly worse off, with 91% of SMSF set up advice files not complying with the law.
The regulator reviewed 250 client files randomly selected from ATO data and assessed them for compliance with the ‘best interest’ duty and other obligations in the Corporations Act. It found that 91% didn’t comply, in part due to failings in record-keeping. In 19% of files ASIC found clients were at increased risk of financial detriment due to a lack of diversification and in 10% the client was “likely to be significantly worse off in retirement due to the advice”. ASIC said it will be taking “follow up” regulatory action.
ASIC Deputy Chair Peter Kell said the standard of SMSF advice must improve.
“A healthy and robust 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.”
Market research conducted by ASIC found that many SMSF trustees do not fully understand their obligations as SMSF trustees, or the risks of SMSFs.
The online survey found 33% of SMSF trustees didn’t know an SMSF was required to have an investment strategy and 29% believed SMSFs have the same protection from fraud as prudentially regulated super funds.
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