The Australian Securities and Investments Commission (ASIC) has confirmed that Self Managed Superannuation Fund (SMSF) advice is now firmly in its surveillance sights, including whether the Future of Financial Advice (FOFA) best interest test is being applied.
At a time when the major industry superannuation funds are continuing to complain that members are being inappropriately directed towards SMSFs, ASIC Commissioner, John Price has told a risk management forum that the regulator “will test the quality of advice to consumers who have set up self-managed superannuation funds”.
“This includes compliance with FoFA best interests and related obligations,” he said.
However, the ASIC commissioner pointed to the fact that superannuation funds would also be under scrutiny with respect to the advice they provided, noting that while the regulator would continue to examine the practices within the major banks it would also looking at those within superannuation funds.
“We are continuing to look at the quality of financial advice,” Price said. “This year, we are focusing on advisers who we have identified as having a high risk on non-compliance from our previous review of the big five financial advice firms. We are also looking at firms’ programs for remediating consumers, including in relation to the provision of non-compliant advice and for fee-for-no service breaches.”
He said that ASIC was also reviewing the breach reporting practices in large banks and that with respect to the insurance sector it was reviewing the selling practices within the direct channel for life insurance and insurers’ governance for the design and distribution of add-on insurance products available through car dealerships.
Looking at the superannuation and managed funds sector, Price said ASIC would continue to focus on disclosure practices that might mislead investors and consumers or affect their understanding of the risks, fees, costs, features and performance of financial products and services.
“We will review higher-risk responsible entities and superannuation entities, focusing on their culture, incentives and compliance arrangements,” the ASIC commissioner said. “We will also review the practices of superannuation trustees, including the provision of advice, fee-for-no service, and disclosure of benefits and inducements.”
