ASIC updates guidance on SMSF advice
The Australian Securities and Investments Commission (ASIC) has updated its guidance on the provision of self-managed superannuation fund (SMSF) advice, highlighting SMSF risks and the importance of seeking professional advice.
The regulator stressed the key role of financial planners played in advising consumers on whether or not SMSF was suitable for them and the range of factors that should be taken into account.
The key changes made to the INFO 274 (Tips for giving self-managed superannuation fund advice) included efforts to ensure that comparisons about SMSFs and Australian Prudential Regulation Authority (APRA) regulated funds remained relevant and up to date.
The changes would also remove guidance about a minimum balance for an SMSF reflecting that balance alone was not the driving indicator of suitability and the new recommendations consolidated existing guidance in INFO 205 and INFO 206.
ASIC said the review aligned with its key strategic priorities of protecting consumers as they planned their retirement decisions.
On superannuation balance, the regulator said it was just one factor to consider when determining the suitability of an SMSF for a client, with other equally important factors being investment strategies, diversification, liquidity, asset choice, trustee responsibility and time-commitment as well as “the potential benefits of professional advice when deciding to set up and/or switch to an SMSF”.
“In response to feedback received from ASIC’s targeted industry consultation, ASIC has provided case studies in an attachment to INFO 274 to illustrate that an SMSF balance is only one factor a financial adviser should consider when determining whether an SMSF is suitable for their client,” ASIC said.
“Financial advisers may also consider resources available on the ATO’s website about setting up and running an SMSF when determining whether an SMSF would be suitable for their client.”
When it comes to comparison of performance between SMSFs and APRA-regulated funds, the regulator stressed that there was also a number of factors to consider, including “the considerable structural differences, investment options available and investment return calculation methodologies”.
“Clients should understand the costs, risks and the trustee responsibilities that they would take on in setting up an SMSF and how this compares to their existing APRA-regulated fund. A financial adviser can assist clients with making an informed decision about whether an SMSF is the right retirement savings vehicle for them.”
Shame that a significant portion (my guess would be the majority) of SMSF’s are set up without a licensed adviser being involved.