The release of the Australian Securities and Investments Commission (ASIC) document shows the regulator is “poised to tighten the rules on advice given to SMSFs by licensed advisers”, ASFA stated.
The association said that as a consequence, it has renewed its call for mandatory Australian financial services (AFS) licensing for “all persons involved in the sale of investment products to SMSFs”.
Currently, accountants are able to advise on the establishment and closure of SMSFs under a carve-out, being phased out on 1 July 2016 but to be replaced by the option of taking up a limited Australian financial services licence that will allow SMSF practitioners to provide limited advice such as class of product advice to SMSF trustees.
However, there is no set restriction on other service providers, such as property spruikers suggesting to consumers that an SMSF may be a vehicle that can help them to buy a property.
“ASFA has expressed concern previously that many SMSF holders are being encouraged or incentivised to invest in products or schemes which may not be in their best financial interest,” ASFA stated. This stance does not refer to accountants but to other entities involved in selling products to SMSFs.
Quality advice is needed to ensure SMSF members know what investment risks they may be facing, according to ASFA.
“It's encouraging that the regulator is examining the governance of the provision of financial advice in this sector, as it is in the best interest of the Australian community that concessionally-taxed superannuation contributions are managed prudently,” the association stated.
“ASFA considers that an essential first step should be ensuring any individual or firm marketing products to an SMSF hold an [AFSL].
“Such a requirement would help ensure any person giving advice to an SMSF is suitably qualified to make recommendations that are in the best interest of their client. It would also mean that the adviser would need to hold appropriate professional indemnity insurance and be subject to the supervision of ASIC.”
SMSF trustees establishing a fund in order to exercise more control should not be compromised by inappropriate advice or mis-selling of investment products by financial advisers, according to ASFA. “Mandating that all advisers to SMSFs are licensed and ensuring compliance is necessary to help achieve this,” the association stated.
