Yesterday, the Australian Securities and Investments Commission (ASIC) acted on its taskforce's finding of “room for improvement” in the SMSF advice sector, proposing additional disclosure requirements be placed on professional advisers working with SMSF trustees.
“Given the significance of the decision to establish an SMSF, and the growth of this sector, we think there is a need to improve the quality of advice given to clients when establishing or switching to an SMSF,” the report states.
“We propose to do this by imposing specific disclosure obligations on those who provide advice on SMSFs, to assist clients in making a decision about whether to establish or switch to an SMSF.”
Referencing the collapse of Trio and subsequent detriment to SMSF investors, the report specifically calls for a requirement to inform SMSF clients about compensation options available to them under the SIS Act – or lack thereof.
The SMSF Professionals’ Association of Australia (SPAA) welcomed the consultation paper, pledging to engage with ASIC during the consultation process.
“The announcement by ASIC today is consistent with SPAA’s objective as the peak body for the SMSF sector in Australia,” said SPAA chief executive Andrea Slattery.
“SPAA is an advocate for the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice.”
However, SPAA’s director of professional standards, Graeme Colley, told SMSF Adviser that the regulator may have over-emphasised some aspects of the report, including the issue of costs associated with SMSF establishment and management.
“It’s fair enough that they are looking at costs – but there are a whole range of reasons why people go into self-managed funds, and costs is not the main one from what we can gather,” Mr Colley said.
While Mr Colley declined to comment directly on whether ASIC is unfairly targeting the sector, Mr Colley did say it was “interesting that we don’t see similar analysis of the larger superannuation funds and whether a particular fund may be the right one for a particular client”.
The Institute of Chartered Accountants Australia (ICAA) also welcomed the consultation paper, but the ICAA’s head of superannuation, Liz Westover, said that ASIC’s focus on the advisers working in the sector may not reflect the reality of risks existing in the SMSF space.
“The real hole in the picture for me is those trustees that are not getting any advice,” Ms Westover told SMSF Adviser.
“You’re not required [to get] advice to set up an SMSF, You can go to online providers and download all your own legal documents… so my concern is how do we make sure those people are not only able to access advice but do actually access that information.
“I think we’ve got to be very careful that we don’t overregulate to the point where it becomes too costly to obtain advice.”