Licensee response to ASIC guidance the next big piece for advisers
While the SMSF industry has welcomed ASIC’s updated guidance on SMSF advice, the impact for advisers will ultimately depend on how licensees choose to apply it, says a technical expert.
Earlier this month, ASIC released its updated guidance on SMSF advice, revising its previous guidelines concerning minimum balances for SMSFs.
ASIC released Information Sheet 274 which consolidated and replaced two previous information sheets, INFO 205 and INFO 206. The guidance helps Australian financial services (AFS) licensees and their representatives comply with their obligations when providing personal advice about SMSFs.
The updated guidance has been welcomed by SMSF industry groups such as the SMSF Association with the guidance removing references to a $500,000 threshold for establishing a fund and highlighting the importance of advisers having SMSF specialist knowledge.
Speaking on the SMSF Adviser Show podcast last week, Smarter SMSF chief executive Aaron Dunn explained that most advice dealer groups adopted a strict interpretation of the thresholds and costs listed in the previous information sheets from ASIC.
“We saw licensees hang their hat on things like thresholds and costs and so forth which were totally out of kilter with the reality of how things work,” said Mr Dunn.
Mr Dunn noted that the position that ASIC formulated in Information Sheets 205 and 206 and some of its fact sheets was based on antiquated data.
“So that did stymie opportunities for advisers to offer SMSFs [as an option to clients],” he said.
ASIC has removed the threshold amount for starting an SMSF in its new guidance which follows research released by the SMSF Association and University of Adelaide earlier this year.
While the updated guidance still stresses the importance of clients considering the costs associated with an SMSF before establishing a fund, it acknowledges that costs may vary for different clients depending on their relevant circumstances.
Mr Dunn said this is a positive step for the SMSF sector given that cost is only one factor in the decision making process with SMSFs.
However, he noted that the way in which the guidance is applied by licensees will also be very important for advisers.
“It will be interesting to see how licensees now respond to this guidance. Are they going to still have some notional minimum values in place that they’ll impose on advisers or will they refer to the research provided by the SMSF Association?” he questioned.
“That’s going to be the next interesting piece in this because ASIC is now saying that it is not in its remit to say what is an appropriate threshold and that it should be left instead [to licensees and advisers].
“So, is that going to be left to the professional judgement of advice professionals themselves or will licensees still impose some oversight to that process as well?”