Australia: ASIC consults on the quality of advice for SMSFS


On 16 September 2013, ASIC released Consultation Paper 216 Advice on self-managed superannuation funds: Specific disclosure requirements and SMSF costs (CP 216) that outlines proposals to impose disclosure requirements on advisers such as financial planners and accountants and provide guidance on the costs associated with SMSFs.


ASIC currently regulates the gatekeepers who provide products and services to SMSFs and retail clients looking to invest in SMSFs. These gatekeepers include accountants, financial advisers and product issuers.

On 16 May 2012, the Parliamentary Joint Committee on Corporations and Financial Services (PJC) released a report on the Inquiry into the collapse of Trio Capital. In that report, the PJC found that many investors in Trio were not aware of the risks associated with investing in SMSFs. The PJC recommended that ASIC conduct an investigation of both planners' and accountants' advice to SMSF investors in Trio Capital.

In September 2012, ASIC established an SMSF taskforce to examine high-risk SMSF issues and as a part of its first major project, conduct a surveillance of financial advisers and the quality of advice given to investors in Trio. ASIC released Report 337 SMSFs: Improving the quality of advice given to investors on 18 April 2013 summarising its findings from this first project. The report identified areas of poor quality advice such as advice not being sufficiently tailored, lacking consideration of alternatives to SMSFs, or recommending an inappropriate single asset class.

As a part of the SMSF taskforce's second major project, ASIC is consulting on:

  • its proposals to require specific disclosures of information to investors; and
  • the appropriate resource level investors should have before establishing an SMSF.

The proposed reforms in CP 216 are designed to improve the quality of advice and disclosure of information that can influence retail clients to either establish or switch to an SMSF.


ASIC proposes to release a Class Order to require Australian Financial Services (AFS) licensees and their authorised representatives to disclose to clients certain matters when providing personal advice on setting up or switching to an SMSF. Those matters include:

  • a warning that SMSFs do not have access to the compensation arrangements under the Superannuation Industry (Supervision) Act 1993 for any loss suffered as a result of fraud or theft that may otherwise be available to APRA regulated funds;
  • the responsibilities and obligations of an SMSF trustee in running an SMSF, including retention of responsibility when certain functions are outsourced to external service providers;
  • risks associated with switching to or running an SMSF including loss of insurance benefits, lack of access to the Superannuation Complaints Tribunal to resolve SMSF complaints, or risks associated with using individual trustees;
  • the responsibility of developing, implementing and maintaining an appropriate investment strategy and benefits associated with asset diversification;
  • the time and skills required to effectively run an SMSF and make appropriate investment decisions;
  • the costs involved in managing an SMSF (with an estimate of the likely costs);
  • information about an exit strategy and the costs and process involved in winding up an SMSF; and
  • advice on the changing nature of the taxation and superannuation regulations that apply to SMSFs and the responsibility of an SMSF trustee to update knowledge about changes to the law.

It is proposed that the above disclosures be provided to the client at the same time and by the same means as the personal advice is provided, such as in the statement of advice. If advice is provided verbally to clients, advisers should provide the client with the specific disclosures before providing any recommendation in relation to establishing or switching to an SMSF.

CP 216 also outlines ASIC's proposed guidance on SMSF cost issues that advisers should consider and explain to clients including:

  • costs associated with establishing an SMSF such as corporate trustee fees;
  • ongoing costs incurred in running an SMSF such as audit costs;
  • costs associated with winding up an SMSF;
  • minimum balance required to make a SMSF cost-effective;
  • time associated with managing an SMSF; and
  • insurance costs.


ASIC proposes to release a Class Order and regulatory guide in February 2014 and allow a transitional period of six months after release of the Class Order. This would allow AFS licensees and their authorised representatives until August 2014 to implement the proposed disclosure requirements.


The closing date for submissions on the proposals in CP 216 is 11 November 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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