ASIC has found that a “large number” of SMSF advice providers are providing non-compliant advice, warning that affected clients will need to be remediated by licensees.
The corporate regulator has released two reports on SMSF advice that it hinted at during royal commission hearings into financial advice in late April.
ASIC has confirmed that 91 per cent of financial advice related to the setting up of an SMSF did not comply with the best interests duty and related obligations.
Report 575: SMSFs: Improving the quality of advice and member experiences and Report 576: Member experiences with self-managed superannuation funds were released yesterday afternoon.
ASIC reviewed 250 client files that were randomly selected based on ATO data. In 10 per cent of the files reviewed, the client was likely to be "significantly worse off in retirement due to the advice".
In 19 per cent of cases, clients were at increased risk of financial detriment due to a lack of diversification.
Based on its research, ASIC concluded that "many SMSF members do not properly understand the advantages and disadvantages associated with setting up and running an SMSF."
In addition, a "large number of advice providers are currently not complying with the best interests duty and related obligations", said the report.
"We will be requiring [licensees] to review and remediate clients who received non-compliant advice. As part of this work, licensees may be required to review and remediate a broader sample of SMSF advice than that reviewed as part of this project," said the report.
The regulator said it will also take regulatory action "where appropriate".
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