90% fail rate in ASIC’s SMSF compliance swoop
The royal commission has heard nine in 10 SMSF professionals failed to comply with the Corporations Act for SMSF establishment advice, as part of a broader ASIC review of licensees and dealer groups.
As part of research set to be made public this year, ASIC will show fieldwork that indicates an overwhelming failure to comply with best interests duty and other associated obligations.
Key pain points include documentation in advice files, consideration of existing products when recommending a new fund is set up and poor audit processes.
“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 into Misconduct in the Banking, Superannuation and Financial Services Industry today.
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,” he said.
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,” he said.