Advisers significantly impacted by PC
The Productivity Commission (PC) may have been tasked with addressing the competitiveness and efficiency of superannuation but its final report had financial planners squarely in its sights impacting approved product lists (APLs) and specialist training for self-managed superannuation fund (SMSF) advisers.
A full reading of the PC’s final report reveals that it not only wants an immediate end to trailing commissions attaching to superannuation-related advice, but also a compulsory requirement to spell out the make-up of approved product lists and specialist training for those providing advice around setting up an SMSF.
At the same time, it has recommended that the Australian Securities and Investments Commission (ASIC) “focus more on the conduct of superannuation trustees and financial advisers and the appropriateness of products and urged “recurring thematic reviews on financial advice in superannuation”.
The final report recommends that the Government “immediately amend the Corporations Act to ensure that the term ‘advice’ can only be used in association with ‘personal advice’ — that is, advice that takes into consideration personal circumstances”.
“The Government should also immediately require Australian Financial Service Licensees to disclose to ASIC, in relation to superannuation products:
· the number of products on their approved product list (APL)
· the proportion of in-house products on their APL
· the proportion of products recommended that are in-house
· the proportion of products recommended that are off-APL. ASIC should publish this information annually. ASIC should also conduct selected audits of the information received to facilitate assessment of the effectiveness of advisers in meeting clients’ best interests,” the report said.
On the question of SMSFs, it said the Government should:
· require specialist training for persons providing advice to set up an SMSF
· require persons providing advice to set up an SMSF to give prospective SMSF trustees a document outlining ASIC’s ‘red flags’ prior to establishment
· extend the proposed product design and distribution obligations to SMSF establishment.
The report also recommends that “ASIC should focus more on the conduct of superannuation trustees and financial advisers, and on the appropriateness of products (including for particular target markets) and disclosure”.
It also recommends requiring “all superannuation funds to publicly disclose to current and prospective members the proportion of costs paid to service providers that are associated with related-party outsourcing arrangements”.
The PC also recommends ASIC “undertake recurring thematic reviews on financial advice in superannuation, including advice in relation to choice platform products and SMSFs”.
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