Advisers question ASIC’s ‘targeted’ SMSF approach
Experienced financial adviser readers of Financial Newswire have drawn parallels between the Australian Securities and Investments Commission’s (ASIC) Report 824 on self-managed superannuation (SMSF) establishments to its 2014 Report 413 on life insurance.
They have claimed that both REP 824 and REP 413 are based on targeted reviews undertaken by ASIC, rather than a broad sampling of advisers.
The concerns about the similar bases of the two reports is that REP 413 was picked up by the former Labor Government as a confirmation of poor advice practices and, ultimately, gave rise to the introduction of the Life Insurance Framework (LIF).
On the face of it, the similarities between the two reports are striking with ASIC in 2014 basing its findings on a review of 202 advice files while the case of REP 413, the regulator reviewed 100 advice files.
In 2014 it found the following: “Of the 202 files in our sample, we found that where the adviser was paid under an upfront commission model, the pass rate was 55% with a 45% fail rate. Where the adviser was paid under another commission structure, the pass rate was 93% with a 7% fail rate”.
In 2025, REP 824 had ASIC stating: “Files relating to the establishment of SMSFs has identified concerns that 62 files failed to demonstrate compliance with the best interests duty, with 27 files – over a quarter – raising significant concerns about client detriment relating to recommendations to set up an SMSF. Barely a third of advice files – 38 of 100 – demonstrated compliance with the longstanding obligation for advisers to act in clients’ best interests”.
However, as has been pointed out by advisers responding to Financial Newswire’s coverage of the ASIC report, the regulator has admitted that it “used risk indicators to select a sample of 100 SMSF establishment advice files for our review”.
“The sample was not selected with the intention of being random or representative of the financial advice sector,” it said.
In other words, it was a highly focused with the sample derived via risk indicators and therefore likely to throw up some worst-case examples.
In 2014, ASIC explained that in developing Report 413 it had undertaken roundtables of 12 insurers followed by “a targeted surveillance of advisers who give personal advice to consumers on life insurance products, which involved a review of 202 advice files (phase 2)—our surveillance targeted advisers who sell a large amount of life insurance products”.
REP 413 went further in specifying that “This was a targeted surveillance in so far as the sample of files selected for review was not a random sample of advice from randomly selected AFS licensees or authorised representatives. Rather, our objective was to identify the licensees and authorised representatives who were active in giving life insurance advice so as to test the quality of advice these licensees were giving”.
What is more, ASIC in 2014 admitted that it had asked the insurers to
“tell us the three licensees or authorised representatives who had:
(a) the highest number of new ‘in force’ policies written in the relevant period (2012 and 2013 financial years); and
(b) the highest number of policy lapses in the relevant period.”
It is history that at the time of the industry debate leading up to the introduction of the Life Insurance Framework it was generally acknowledged that some advisers were guilty of “churning” clients and that the insurers would have been well aware of who those advisers were.
Recent analysis from the Council of Australian Life Insurers (CALI) has revealed that there are now only 185 pure risk advisers now operating in the profession.
ASIC repeatedly takes a targeted approach to “reviews” then misrepresents their outcome as systemic industry wide problems requiring layers and layers of inefficient regulatory strangulation for all advisers, including the honest professional majority. This further increases the cost and complexity of professional advice for consumers, and pushes them towards poor quality unregulated advice. The bottom line… most consumers end up worse off.
Why can’t ASIC just take a targeted approach to enforcement, and stop the rogue minority before they do significant harm? All the major financial advice “scandals” over the last 10 years or so were committed by rogue advisers breaking the then current laws, whom ASIC was repeatedly warned about.
You’re being very silly. You’re asking ASIC to use common sense and conduct themselves in a professional and competent manner.
Cmon next you’ll be saying pigs are flying out your window.
It is a great pity that these facts were buried under a sea of outrage and misleading slandering of financial advisers in 2014. ASIC deliberately orchestrated the smear campaign. They repeated the headline claims over and over, without ever providing clarification that the review was targeted.
Now they are at it again. Shameful behaviour from our regulator.
What is the agenda ASIC, Kill more Advisers ? Add more Red Tape ?
ASIC target known dodgy SMSF files.
Wow ASIC, imagine finding some Dog SH#T on the ground.
If you Faceplant into it, do you think you will smell SH#T?
The SMSF review was a targeted review, looking at advisers who ASIC thought posed the biggest risk of providing inappropriate advice. It was not representative of the SMSF advice profession as a whole. Yes there is significant reporting in the media as though it was reflective of the entire profession. This is illustrated by the following article from last week:
https://www.financialstandard.com.au/news/majority-of-smsf-establishments-based-on-bad-advice-asic-179810504?utm_medium=email&utm_source=WildebeestNewsletter
So having failed to provide sufficient clarity in their original message and caused all this mis-reporting, what are ASIC doing to correct the misunderstanding? It seems absolutely nothing.
I wonder how ASIC would think about an adviser who mislead their client by leaving out important information or failing to ensure that the client understood that important information and then failed to correct the misunderstanding. I expect they would getter hammered!
The linked article is disgraceful reporting, particularly given it’s an industry publication. Perhaps some of FS’s “Power 50” advisers (based on having high social media presence), should use their social media profiles to push back against ASIC’s and FS’s misrepresentations.
I have a significant distrust of ASIC and their approach.
I also find it very difficult to separate Commissioner Alan Kirkland’s work at ASIC from his previous role as CEO of a consumer advocacy.
Something smells rotten here… Again.
Where are the professional associations?
Where is the accountability on journalists who fail to reference the sampling method?