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ASIC ropes advisers into Choice performance obligations

Mike Taylor21 February 2024
Stressed businessman penalised

The Australian Securities and Investments Commission (ASIC) has specifically named financial advisers and licensees as having an obligation to ensure clients are not left in under-performing choice superannuation products.

The regulator has issued a statement outlining the results ofa review which it said had found that there was often insufficient emphasis on and a lack of transparency about Choice investment options that failed to meet performance expectations.

It said advisers should treat performance as a primary consideration.

“There was little evidence of trustees communicating to members about investment option performance in a targeted manner, and financial advisers were not always addressing underperformance where relevant,” ASIC said.

“Members should be informed about their super investments – not left in the dark if their super investments are not performing as expected, and there may be better alternatives,’ Ms Constant said.

ASIC’s review confirmed trustees, advice licensees, and advisers should undertake performance-focussed due diligence before offering investment options to members, approving options for use by advisers or recommending them to members. They also need to take care not to fail in their duties by over-relying on each other or external rating agencies when performing their roles.”

ASIC expects trustees to:

  • prioritise investment performance throughout the product lifecycle;
  • have systems in place to detect and address persistent underperformance;
  • regularly monitor investment option performance against return objectives and benchmarks;
  • ensure they have sufficient capacity to manage investment options, including clear and comprehensive policies, resources, and data reporting arrangements;
  • effectively communicate with members about performance, which could include targeted communications and comparisons of actual returns to return objectives; and
  • act in response to sustained underperformance to minimise member risks.

“Advisers should treat performance as a primary consideration and, where an option is underperforming, communicate why their recommendation is appropriate despite the underperformance and based on the client’s relevant circumstances,” it said.

 

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Chris Cornish
1 month ago

“Past performance is no guarantee of future results” is something ASIC are always keen to say.
Yet when it comes to them, they expect past results to now be written down in the ever expanding SOA (which I thought they were claiming could be simplified).
I am quite happy to explain my recommendations to a client, or some complaints tribunal. But to address any historic underperformance for each investment recommendation in an SOA is more time consuming, pointless bureaucracy.
I’d go on to say, that if this requirement stands, then advisers should also be compelled to explain why they think any out performing investment will continue to out-perform, when historically we know that a fund manager doesn’t continually out-perform.

Corrupt Commie Canberra
1 month ago
Reply to  Chris Cornish

The nationalisation of the entire $3.5 Trillion $$$$ Australian Super system via Union, Labor, Industry Super is progressing EXTREMELY WELL.

And LNP have done zero about supporting SMSF and Real Advisers and are getting killed in the process.

These modern day Union Gangsters wear nice suits, smile politely and consistently tap the pocket of almost every Australian to further their agenda. $$$$$ hundreds of mill ruins collected annually $$$$$$$.

The Left Wing have been far more cunning than the Right Limping Wing.
Do we really want to become almost as controlled as China ? It’s happening right here right now.

Researcher
1 month ago

Any commentary from ASIC on the practice of certain funds deliberately manipulating the returns via the use of unlisted assets to avoid failing the performance test? Advisers take this into consideration when assessing “under-performing” funds. Also great to see ASIC clear hatred of financial advisers again. Instead of going after the source of the issue, ie product manufacturers, it becomes the fault of advisers. Why doesn’t ASIC stop wasting everyone’s time and just say what they really want which is for all super to be moved to their buddies at the union funds.

Anonymous
1 month ago
Reply to  Researcher

Where was this statement made and why did it come about?

Anonymous
1 month ago
Reply to  Researcher

I agree with your statement Researcher. I was merely questioning ASIC’s motives. I’m certain they have more pressing matters to deal with.

Fed up with Canberra.
1 month ago

Wow. These people really are clueless. Do they honestly think performance comes from a hard-working super fund and not from taking on risk. Do they realise people have different risk profiles and some may not even need performance, just capital preservation. Do they realise that a fund with $300bn under management (Aust Super) cannot really outperform. They can massage returns on unlisted assets but this is not real and will be paid for later (listed real estate is 28% ahead of unlisted over past 12 months, so this has begun). Do these clowns understand anything at all about investing. The only way you’ll be able to satisfy these halfwits is to go for the index high growth option. Maximum return and can’t underperform the index, also a low fee. Of course, advisers will be blamed when the next GFC happens and these options tank 35%.
I give up. The morons won!

One foot out the door.
1 month ago

No, they don’t. But that is unfortunately irrelevant, ASIC smells blood in the water again

Anonymous
1 month ago

I mean where and why did ASIC make this statement. Will they be on the tonight’s news addressing an industry group at a conference?

One foot out the door.
1 month ago

This could be a very big deal.

Lets say you have used an assets consultant to set up SMA on platform you’ve moved all your clients into those portfolios. Say $300 M and your portfolios consistently undeform or fall into the bottom quartile I’d say you will have to move those clients.

That’s huge!

XTA
1 month ago

Looks like the cost of advice will be increasing as advisers may have to move clients but be captured under inefficient regulations and compliance. Well played ASIC

Ex Adviser
1 month ago

Should there be a check on the under performance of ASIC

Ben Warner
1 month ago
Reply to  Ex Adviser

ASIC under performance- you bet.
Try getting a company reinstated. Expected time frame 28 days. Actual timeframe over 6 months.

I'm ASIC and tired of this
1 month ago

Will the ‘qualified advisers’ at your local industry fund be required to do the same when they recommend said funds products? This is all part of the bigger push to get everyone into a few union controlled funds which will further their affiliated political interests and those of the global investment behemoths they are in bed with.

I'm ASIC and tired of this
1 month ago

They also don’t want bespoke investments at an individual level. Lowest common denominator pooled funds for the masses only.

Ben Warner
1 month ago

ASIC can be regarded as a marketing arm of the ISA.
So how often can we switch clients?
This will incur additional fees, I’m sure ASIC expects us to do this as a pro bono exercise.
meanwhile ISAs provide subsidised advice, actively engage in fees for no service, have unqualified advisers providing the very same advice we need to be qualified to deliver.
This industry is in an increasingly confused state.

Scott
1 month ago

I like how the article has a photo of an adviser considering his options from a mental health perspective as the photo. Time to leave this stinking pile of a profession.