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ASIC warns advisers to be vigilant in SMSF advice

A report released by ASIC in April reaffirmed the regulator’s commitment to ensuring advisers offer quality SMSF advice to investors.Graeme Colley from the SMSF Professionals Association of Australia agrees that advisers must be diligent in the quality of advice when advising clients to establish their own fund.

Video transcript below:

Stephanie Zillman, Wealth Professional TV
Stephanie Zillman:
 A report released by ASIC in April reaffirmed their commitment to ensuring advisors offer quality SMSF advice.  ASIC said advisors must be diligent in the quality of advice when advising clients to establish their own fund. Graeme Colley from the SMSF Professionals Association of Australia says in doing so, advisors must take in the entirety of their client’s financial outlook.  

Graeme Colley, Director, Education and Professional Standards, SPAA
Graeme Colley:  I think the first thing you need is that holistic advice, not only about what their superannuation aspirations are, but also that all their financial affairs, because that’s where you are going to make that judgement on whether a self managed fund is the right decision for that client.
Stephanie Zillman:  One concern raised by ASIC was that advice was not being sufficiently tailored to the needs of individual investors.  Colley adds that the risks are high for advisors not adequately tailoring their advice.
Graeme Colley:  Well tailoring advice is what financial planning is about.  It’s making sure that you are doing the right thing by the client and it seems to me that some of that advice may not have done that.  I haven’t seen that advice but that would be interesting to see that particularly if it’s the client that’s saying give me this and the advisor is saying, okay well I will give you that but not taking into account other aspects.
Stephanie Zillman:  ASIC stated that while most advice they encountered was rated adequate, they found pockets of poor advice.  One such concern was that suitable alternatives to a SMSF are not fully considered. 
Graeme Colley:  Like all financial advisors should, he’s certainly got the authority to look at all types of superannuation and that’s very important.  When you’ve got accountants, they can only talk about self managed superannuation funds and this limited licensing arrangement that’s coming in from the 1st of July this year, will help solve that problem.  That is that accountants going forward will be able to talk about other types of superannuation and how that fits into the client’s aspirations.
Stephanie Zillman:  Concerns previously raised in the advisory space have now resulted in the FOFA legislative changes which Colley says should be seen as a good thing for the industry.
Graeme Colley: Well we are seeing changes with the licensing arrangements.  Firstly we are seeing the limited license being introduced for accountants and then the taxation legislation is being amended so that financial planners will have to do a subject or have some knowledge in the tax area and I think both of those initiatives are excellent because what we at SPAA want to see is an improvement in professional standards and professional education.
Stephanie Zillman:  This is Stephanie Zillman reporting for Wealth Professional TV.