Queensland financial adviser Drew Grosskreutz advised clients to establish SMSFs to purchase properties using a limited recourse borrowing arrangement without considering if this was in their best interests, according to ASIC.
ASIC found that Mr Grosskreutz failed to properly identify what it was that his clients wanted advice on and to reasonably investigate what financial products would best suit their needs.
He also failed to make reasonable enquiries into the clients’ relevant objectives, financial situation and needs; give priority to his clients’ interests and understand what was required of him to comply with the best interests duty, ASIC said.
ASIC’s surveillance of Mr Grosskreutz looked at a number of his client files from AIW Dealer Services Pty Ltd, where he was an authorised representative from January 2013 to September 2016. Mr Grosskreutz was appointed by a corporate authorised representative of AIW Dealer Services called Otium Advice Pty Ltd.
ASIC deputy chair Peter Kell said the decision to establish an SMSF is one of the most significant steps a consumer can take in relation to their retirement savings.
“It is therefore essential that before making the decision to set up an SMSF, consumers have access to good quality, tailored advice that is not conflicted,” said Mr Kell.
The sad reality is Drew is still at it ripping people off. Not in finance but at his usual deceit and lies. As they say a leopard never changes its spots!
Perhaps there is a disconnect between what the AFSLs think is acceptable and what ASIC thinks is acceptable. At different times ASIC has come out with example SOAs that purport to be simple & concise that could be used by practitioners. But when they review actual advice docs they want everything and the kitchen sink covered in the SOA, such that the length expands to a gazillion pages.
When ASIC says that such a large percentage of advice docs arent up to scratch, it’s not because they fail to meet the clients goals/needs, have inadequate disclosure of remuneration, etc. It’s because of stupid things like advisers failing to spell out the myriad ways that the client can make contributions to super, that premiums can be paid in 6 different ways, that u might miss out on movie tickets if u rollover your super from a union super fund. People come to advisers to have all this stuff sorted out for them, they dont need (and more importantly dont want) to have so much information that they are in an informed decision. It still doesnt make any sense to most people. They want simple, concise direction. Do this, do that, you’ll be covered, your super will grow, you’re on your way to a better financial future. Instead we are forced to give them all this crap that ASIC says we must.
The adviser continues to be a scapegoat in these situations. Surely there needs to be more focus on the AFSL holder not just the representative. In my experience, dealer groups like AIW Dealer Services are very gracious and doting whilst the going is good, as soon they are required to provide the support they are intended to give (and remunerated for) they cut and run.
Individuals can go off and establish an SMSF on their own with no advice, no restrictions because it’s their money. But heaven help any adviser who assists a client to do what the client will go off and do anyway. Despite the fact that you do your best to ensure that they navigate the pitfalls of SMSFs & LRBAs. Despite the fact that you help them to arrange insurance before they cancel their existing cover (or just rollover your super with the ATO form their accountant told them they could download). Despite the fact that you might council them on the need to ensure adequate cash is retained post-purchase to cover liquidity in the fund, to perhaps not use all their money on the property to maintain diversification.
Who’s to say that doing this isnt in the clients best interest? How would ASIC know? They would prefer that no-one got advice and that all individuals left their money in an industry super fund. When done correctly, property and SMSF are a great combination, one that aligns the members long term interests in super with a long term investment class.
Seems like a shake-down by ASIC. Maybe they are trying to determine whether there are systemic issues with particular dealer groups?
This whole “best interests” rider is a complete mystery to me. Surely the only one who can determine what is in the client’s best interest is the client.
So long as they are happy with the advice, and are making money, then ASIC should just go away and leave everyone alone.
Interesting to note that the above article, and all others published in relation to the “best interests” claim, never actually mention the outcome of the advice. Was it good advice, or bad; did the client make money or lose money; was the client happy with the advisor? All relevant questions that never seem to get a mention – just some nebulous notion of “best interest” somehow determined by a regulator with a checklist and a litigation quota to fill.
ASIC report re377 published in April 2013 showed that of the sample advice reviewed (based on newly established SMSFs with a median balance of $300k, 18% borrowing for property), 28% were poor, 71% adequate and only 1 of 74 was considered ‘good’ by ASIC.
It needs to be noted that the sample was selected based on lower member balances, older members, low income members and borrowing to invest into property – so it was expected to be lower quality based on the selection criteria.
It would be interesting to go back to those 74 clients and see how satisfied they are now with their SMSF and the quality of the advice they received at the time.
I guarantee that every single client who obtained advice had already made the decision that they wanted to buy property using their super, and just wanted someone to ‘make it happen’.
Even if the adviser provided additional options in the SoA that were in the clients best interests (such as diversifying into other asset classes rather than property), the clients would disregard them and go with the property in super option regardless – the decision likely made on emotion. No excuse however – advisers should be a source of reason and rationality and always comply with the law + best interests duty.
Also, who is AIW Dealer Services? Wouldn’t they’ve picked up on any ongoing issues with the advice if the adviser was registered with them from January 2013 to September 2016? More than 3 years – surely there must have been compliance audits over that extended period?