ASIC delivers major update to provision of SMSF advice

In a statement on Thursday, the corporate regulator said it has updated its guidance on the provision of SMSF advice with the publication of Information Sheet 274: Tips for giving self-managed superannuation fund advice.

This information sheet is intended to help Australian financial services (AFS) licensees and their representatives comply with their obligations when providing personal advice about self-managed superannuation funds (SMSF).

Noting that financial advisers play a key role in advising consumers on whether or not an SMSF is suitable for them, ASIC said key changes made in INFO 274 include:

• Highlighting SMSF risks and the importance of seeking professional advice.
• Ensuring comparisons between SMSFs and Australian Prudential Regulation Authority (APRA)-regulated funds remain relevant and up-to-date.
• Removing guidance about a minimum balance for an SMSF reflects that balance alone is not the driving indicator of suitability, as illustrated in new case studies in INFO 274.
• Consolidation of existing guidance in INFO 205 and INFO 206.
• ASIC’s new INFO 274 follows a review of its guidance on SMSF advice, which saw it engage with industry participants.

In its statement on Thursday, the regulator noted that “superannuation balance, whether high or low, while important, is only one factor when considering whether an SMSF is suitable for a client”.

“Other important factors include the risks and costs associated with setting up and/or switching to an SMSF, investment strategies, diversification, liquidity, asset choice, trustee responsibility and time commitment and the potential benefits of professional advice when deciding to set up and/or switch to an SMSF”.

To cement its point, ASIC said it 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.  

“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”.

The regulator also acknowledged that there are a number of factors that need to be considered when comparing the performance of SMSFs to APRA-regulated funds, such as the considerable structural differences, investment options available and the differing 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,” ASIC said.

“A financial adviser can assist clients with making an informed decision about whether an SMSF is the right retirement savings vehicle for them”.