ISA calls for tougher consumer protections on SMSF advice
Industry Super Australia has called for the design and distribution obligations to be extended to SMSFs.
In a submission to the Quality of Advice Review Issues Paper, Industry Super Australia said there should be stronger consumer protections for advice on SMSFs.
ISA stated in the submission that members in SMSFs bear far greater responsibilities and risks compared to members in other super funds.
The submission referenced an extract from the Productivity Commission review report, which stated that “many SMSF owners lack even a basic understanding of their legal obligations and over 40 per cent of SMSFs persist with low balances, high average costs, and low average returns”.
ISA noted that the decision to switch from an APRA regulated fund to an SMSF is also often made by a consumer after attending a seminar or using an online establishment tool — that is, without personal advice or after only receiving general advice.
“This is particularly concerning given this is one of the most significant steps a consumer can take in relation to their retirement savings,” the industry body stated.
“ASIC has also long been concerned about inappropriate advice being given to consumers on establishing and/or switching to an SMSF. This inappropriate advice has resulted in SMSFs being sold to consumers for whom they are not appropriate, leaving these consumers worse off in retirement.”
The submission stated that “despite these risks, the design and distribution obligations — which provide an important safeguard for consumers where general advice or poor personal advice is given — do not currently extend to SMSFs”.
ISA said these obligations should be extended to SMSFs to mitigate the risk of SMSFs being inappropriately distributed and sold to consumers.
“ISA appreciates that applying the design and distribution obligations to SMSFs is not straightforward and may require some adjustment in the regulatory settings given the issuer of the SMSF is also the trustee,” it stated.
“However, this should not prevent its application. This approach would also strengthen ASIC’s regulatory toolkit when it comes to overseeing the provision of advice relating to SMSFs.”
In its Pre-Budget submission, the SMSF Association stated that including SMSFs as part of the design and distribution regime obligations would result in unnecessary complexity and cost with no consumer benefit.
While SMSFs do meet the definition of a financial product when considered within the DDO/TMD framework, the SMSF Association explained that it is a structure in which to house financial products.
“Those financial products will need to comply with the DDO/TMD regime obligations. There are no consumer or public benefits to be gained by extending the DDO/TMD provisions specifically to the SMSF structure itself,” the submission stated.

Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
- The hypocrisy of ISA always astonishes me.
They bemoan the fact that people switch from APRA Funds to SMSFs with little or no advice "after attending a seminar or using an online establishment tool"; yet never acknowledge that most industry accounts are set up in exactly the same way.
Employees are either dumped into a default Fund chosen by their employer/union, or they jump online and register themselves in three mouse-clicks............all without receiving any advice.
What's the difference??0 - How about ISA get ASIC to come out with another complete set of LIES like the last massive ISA / ASIC False Facts sheet on SMSF costs. That was comprehensively proven to be corrupt False Facts.
Surely ISA there is enough Super being over $3 Trillion and ever increasing to get enough $$$ share you want.
Please stop the rubbish attacks on SMSFs and let those that want to do their own thing Retirement wise do it.
PS - Dear socialist ISA / Unions,
Australia is not China or Russia.
If you want to live and run business in a Socialist / Command economy please move there and leave us alone.
Regards
Democratic Australia with Choice0 - An early test to see if Labor's culture is still to target SMSFs just to help their union super mates. Trying to change the cost benefit between different super products by calling for pointless red tape is a pretty sad reflection on character. Instead ISA could easily return some of the $1b+ in ISH to fund members and make industry super more competitive.0
- Hardly surprising that ISA wants to get rid of SMSF, or at least reduce the herd and force them into their clutches. Mercer etc will also climb on the bandwagon.
Some people don’t want advice, and many are quite capable of looking after things themselves.
Yes, there are clearly inappropriate SMSFs. However they are what proportion of the population? 1%? For that we are going to shackle everyone else?0