In the industry body’s 14-page submission to the Financial Services Reform Taskforce on the proposed legislation to implement 22 royal commission recommendations, it said financial products should not be treated as commodities in a “sales culture” and should only be offered when an individual is seeking advice or has generally inquired about products that will benefit their financial wellbeing.
According to SMSF Association chief executive John Maroney, prohibiting the hawking of financial products has the potential to be an extremely effective measure to prevent property spruikers using SMSFs in a “one-stop property shop”.
“Inappropriate advice provided by these shops, as well as other unscrupulous advisers, has long concerned the association,” he said.
“Although we believe its prevalence across the SMSF sector is low, the detrimental effect on any individual SMSF member can be very significant.”
Mr Maroney said the advice model of one-stop property shops typically occurs when a property spruiker sources a property, organises financing and a client’s SMSF accounting and audit services either for a commission or ongoing fees.
He noted that these businesses have inherent conflicts of interest, lack specialised advice and SMSF skills, and take advantage of customers with limited knowledge of SMSFs, with property seminars being the main source of this unscrupulous behaviour.
“This is clearly a ‘hawking’ procedure. We believe an individual attending a property seminar doesn’t expect to be offered a superannuation product and, in these circumstances, it’s unsolicited and therefore should be prohibited,” Mr Maroney said.
However, Mr Maroney said the draft legislation must allow individuals to be informed about SMSFs when they genuinely inquire about superannuation and retirement products.
“It’s important we don’t throw the baby out with the bath water. We fully support draft legislation that limits the ability of property spruikers to hawk superannuation products, but still allows financial professionals to provide SMSFs as a superannuation option where appropriate,” he said.
“Although we recognise and strongly advocate that SMSFs are not for everyone, they do play a key competitive role in superannuation and raising barriers to their establishment would be detrimental to consumer outcomes.
“A key competitive pressure that SMSFs contribute is providing flexibility and adaptability to cater for unique circumstances, and as such, we believe individuals should be given the ability to engage and manage their retirement savings in ways that best suit their retirement goals.
“This is particularly important, not only to financial advisers but many accountants who are trusted advisers in the SMSF sector.”
