10 min
Episode 40: SMSF advice The ASIC Podcast
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- Government
ASIC Senior Executive Leader Jo Bird joins the podcast to discuss a review of self-managed super funds, and to give some advice to consumers who are thinking of setting up an SMSF.Read the reports of this review Report 575: SMSFs: Improving the quality of advice and member experiences and Report 576: Member experiences with self-managed superannuation funds, and find out more about SMSFs on ASIC's MoneySmart.
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INTRO: Hello, and welcome to the official podcast of the Australian Securities and Investments Commission. In today's episode we'll be discussing ASIC’s review of self-managed super funds. My name is Tessa Loftus and with me this time around is Senior Executive Leader of Financial Advisers at ASIC, Jo Bird. Jo, thanks very much for your time.
Thanks Tessa.
Q: So, can you tell me what the review was about?
There were two aspects to our review. We did a research on the experience of consumers who set up an SMSF and we also did a review of the quality of advice provided to consumers who set up an SMSF
So, first of all talking about the consumer research, there were two parts to that. We did some in-depth qualitative research with SMSF members and we also did an online survey of SMSF members.
For the advice review component of our review on SMSFs we did file reviews of 250 randomly selected advice files that recommend consumers set up an SMSF.
So, essentially, we looked at people’s experiences when setting up an SMSF and the quality of advice they got before they decided to set up an SMSF.
Q: So let’s start by talking about the quality of advice then — what did you find in the file reviews?
In 10% of the customer files reviewed, we found that the customer was likely to be significantly worse off in retirement as a result of following the advice they received.
In a further 19% of the customer files we looked at, customers were at an increased risk of suffering financial detriment due to the lack of diversification of their SMSF.
And then finally, in 62% of the customer files, advisers were unable to demonstrate that they had met their best interests duty – the customer might not actually have been worse off, but the adviser hadn’t demonstrated that the client would be better off as a result of following the advice.
Q: So that’s a 91% advice failure rate — that’s pretty huge. What does that mean for consumers?
It’s a very worrying failure rate, especially considering the importance of superannuation.
The 31% of files where we considered there was likely to be significant financial detriment are obviously the most concerning, and we will be contacting the licensees who are responsible for that advice to make sure they review all their advice and remediate customers as necessary.
Q: Does that mean there will be regulatory action arising from these advice reviews?
ASIC has taken significant action in relation to SMSFs and the advice provided to SMSF members. In fact, there is a summary of the action we’ve taken in the report that we’ve released.
We’ve taken action in relation to SMSF one stop shops and we are continuing to focus on those because of the conflict of interest inherent in that business model. In fact, we’re working on a number of enforcement matters that involve one stop shops at the moment.
We’ve also highlighted risks of aggressive marketing around SMSFs and have taken and are taking enforcement action in response to that marketing.
We won’t be taking action in all cases of bad of advice uncovered in the work we did for this recent review. And that’s because this review was actually a large research project and we looked at a random sample of advice. So, that meant for most advisers we only saw one piece of advice file that they had provided. We generally don’t take enforcement action in relation to one piece of poor advice. But as I said, we will be following up with the licensees to make sure the consumers are remediated.
However, where in the project we
ASIC Senior Executive Leader Jo Bird joins the podcast to discuss a review of self-managed super funds, and to give some advice to consumers who are thinking of setting up an SMSF.Read the reports of this review Report 575: SMSFs: Improving the quality of advice and member experiences and Report 576: Member experiences with self-managed superannuation funds, and find out more about SMSFs on ASIC's MoneySmart.
----more----
INTRO: Hello, and welcome to the official podcast of the Australian Securities and Investments Commission. In today's episode we'll be discussing ASIC’s review of self-managed super funds. My name is Tessa Loftus and with me this time around is Senior Executive Leader of Financial Advisers at ASIC, Jo Bird. Jo, thanks very much for your time.
Thanks Tessa.
Q: So, can you tell me what the review was about?
There were two aspects to our review. We did a research on the experience of consumers who set up an SMSF and we also did a review of the quality of advice provided to consumers who set up an SMSF
So, first of all talking about the consumer research, there were two parts to that. We did some in-depth qualitative research with SMSF members and we also did an online survey of SMSF members.
For the advice review component of our review on SMSFs we did file reviews of 250 randomly selected advice files that recommend consumers set up an SMSF.
So, essentially, we looked at people’s experiences when setting up an SMSF and the quality of advice they got before they decided to set up an SMSF.
Q: So let’s start by talking about the quality of advice then — what did you find in the file reviews?
In 10% of the customer files reviewed, we found that the customer was likely to be significantly worse off in retirement as a result of following the advice they received.
In a further 19% of the customer files we looked at, customers were at an increased risk of suffering financial detriment due to the lack of diversification of their SMSF.
And then finally, in 62% of the customer files, advisers were unable to demonstrate that they had met their best interests duty – the customer might not actually have been worse off, but the adviser hadn’t demonstrated that the client would be better off as a result of following the advice.
Q: So that’s a 91% advice failure rate — that’s pretty huge. What does that mean for consumers?
It’s a very worrying failure rate, especially considering the importance of superannuation.
The 31% of files where we considered there was likely to be significant financial detriment are obviously the most concerning, and we will be contacting the licensees who are responsible for that advice to make sure they review all their advice and remediate customers as necessary.
Q: Does that mean there will be regulatory action arising from these advice reviews?
ASIC has taken significant action in relation to SMSFs and the advice provided to SMSF members. In fact, there is a summary of the action we’ve taken in the report that we’ve released.
We’ve taken action in relation to SMSF one stop shops and we are continuing to focus on those because of the conflict of interest inherent in that business model. In fact, we’re working on a number of enforcement matters that involve one stop shops at the moment.
We’ve also highlighted risks of aggressive marketing around SMSFs and have taken and are taking enforcement action in response to that marketing.
We won’t be taking action in all cases of bad of advice uncovered in the work we did for this recent review. And that’s because this review was actually a large research project and we looked at a random sample of advice. So, that meant for most advisers we only saw one piece of advice file that they had provided. We generally don’t take enforcement action in relation to one piece of poor advice. But as I said, we will be following up with the licensees to make sure the consumers are remediated.
However, where in the project we
10 min