The Australian Securities and Investments Commission (ASIC) has identified real property spruikers as problem area for self-managed superannuation funds (SMSFs), according to ASIC commissioner Peter Kell.
Kell has told a CPA Australia event that the problem of real property investment was identified during an ASIC review of over 100 files relating to the establishment of SMSFs.
Discussing the review process, Kell said the regulator was also concerned by several developments, including an increase in geared investment strategies and increasingly aggressive advertising for SMSFs.
"….We have seen an increase in the targeting of SMSFs by less scrupulous operators, and we are keen to address this risk," he said. "The collapse of Trio, and the Parliamentary Joint Committee on Corporations and Financial Services' inquiry into this collapse, highlighted what can go wrong."
Kell said the review of the 100 investor files relating to the establishment of SMSFs had focused on fund balances of $150,000 or less. He made clear that these 100 did not represent a random sample but that ASIC had "targeted files that looked more likely to be higher risk for SMSF members".
"We rated the personal advice we reviewed as good, adequate or poor," he said. "Overall, we concluded that the majority of investors in the sample reviewed received adequate advice."
However, Kell said that while the majority of advice provided was adequate "we did find concerning pockets of poor advice".
"Much of this advice involved recommendations that investors set up an SMSF to gear into real property," he said. "Where this advice was inappropriate for the individual investors, ASIC will be following up and taking regulatory action."
Kell said ASIC had also found that investors were not warned about the very real risk of not having access to a statutory compensation scheme in the event of theft or fraud.
"Going forward, this will be an area of focus for us. We expect to see advice providers warning investors about this risk," he said.
