ASIC to target advisers over SMSF establishment advice

In an address to a financial adviser event, Alan Kirkland, Australian Securities and Investments Commission (ASIC) commissioner, said the regulator will be reviewing client advice files where self-managed super fund (SMSF) establishment advice was provided to assess compliance with the best interests duty and related obligations.

“We’re also reviewing information from licensees about their oversight and the application of their policies and procedures in the context of SMSF establishment advice,” Kirkland said.

“I expect that we’ll release the findings from this work in the second half of this calendar year.”

Kirkland said ASIC is continuing to see too many examples where advice leads to poor, if not devastating, outcomes for consumers.

“Our ongoing investigation into the Shield Master Fund is one such example, though regrettably it’s not an isolated one. It reflects a pattern of conduct we are seeing all too frequently,” he said.

“This pattern commonly involves telemarketers recruiting consumers before passing them onto advisers. These advisers then recommend that consumers withdraw their superannuation savings from a regulated fund and invest them, sometimes via an SMSF, into a high-risk property scheme or some other high-risk investment.”

He added that ASIC deputy chair Sarah Court described some of this misconduct as occurring “at industrial scale”, which can result in the significant erosion – or complete loss – of a person’s retirement savings.

“While there is often a complex web of individuals and entities involved, inappropriate or poor-quality advice typically plays a pivotal role in the ultimate consumer outcomes,” he said.

Kirkland said one of ASIC’s strategic priorities in 2025 is in providing better retirement outcomes and member services, which includes not just its work on member services for members of super funds, but also a focus on entities and individuals involved in the provision of advice.

“Besides our strategic priorities, we also have enforcement priorities, which are announced annually. And these target specific forms of misconduct that are of serious concern to ASIC,” he said.

“Over the coming year, you can expect, through those priorities, to see a sustained focus on advice-related misconduct. The priorities for 2025 will include misconduct exploiting superannuation savings and unscrupulous property investment schemes.”

He concluded that ASIC’s work in this area won’t be limited to superannuation trustees or responsible entities of managed investment schemes but will include a broad range of entities involved in conduct causing harm to consumers and investors, including advisers and licensees.

Kirkland had previously said the corporate regulator would continue its cold-calling and inappropriate super switching campaign, calling it the “worst behaviour” ASIC has seen.

Speaking at FINSIA’s The Regulators event in November, the ASIC commissioner said that “challenging economic environments always create opportunities for people selling snake oil”.

“The worst behaviour that we see is practices that start with telemarketing or clickbait ads on social media that encourage people to get involved in a review of their superannuation,” Kirkland said.

“They’re often in a well-performing, prudentially regulated fund, and they’re told it’s terrible and they should tip their money either into a platform product or into SMSF, with most of their super then ending up being invested in, say, a high-risk property scheme.

“So, we’ve got some significant action underway against those types of practices, but they’re obviously an enormous concern, because it’s people’s super that’s at stake, and in the worst cases, if it’s invested in some sort of cryptocurrency investment, it often just disappears overnight.”