RC’s last resort scheme is a win for SMSFs

The Royal Commission’s recommendation to introduce a last resort compensation scheme for consumers that suffered a financial loss from ill advice has been heralded as a win for self-managed superannuation funds (SMSFs), according to SuperConcepts.

The scheme would be established as a part of the Australian Financial Complaints Authority (AFCA)  and would be available for disputes involving financial advice failures which resulted in unpaid external dispute resolution determinations, court judgements and tribunal awards.

SuperConcepts’ managing director, Peter Burgess, said that although the AFCA had no jurisdiction over superannuation complaints brought before it by members of an SMSF it did have jurisdiction over financial advice provided to an SMSF member.

Related News:

“Even though the AFCA can make a determination in favour of an SMSF member, under current arrangements, there is still no guarantee that the member will receive any compensation payment,” Burgess said.

“There have been cases in the past where members have missed out on compensation that has been awarded to them because the offending financial firm is insolvent or is simply unwilling to pay.

“And this is where a last resort compensation scheme can play a critical role by ensuring members receive at least partial compensation when all other compensation avenues have been exhausted.”

He said that it was particularly important for SMSF members who unlike members of APRA regulated funds were not eligible for government financial assistance in the event of fraud or theft.

According to him, one of the disadvantages of an SMSF compared to an APRA regulated fund was its lower level of protection members had against unscrupulous operators.

“But we acknowledge a scheme like this needs to be funded which, in line with the Ramsay Review recommendations, is likely to come from a levy imposed on financial firms engaged in the types of financial services covered by the scheme,” Burgess added.

“To this end, to reduce the cost of the scheme, we support measures which require advice firms to hold adequate PI insurance as this will ensure the scheme will truly be a ‘last resort’ for uncompensated losses.”

Related Content

APRA signals more super fund exits

The Australian Prudential Regulation Authority (APRA) has signalled that industry funds may be amongst the under-performers which are ultimately weede...Read more

Super regulation to focus on consumers

Following a 2018 full of upheaval and policy changes taking effect, 2019 looks to be another year of technical and regulatory change for the superannu...Read more

Hayne’s findings important but not without flaw

The 2019 Federal Election is shaping as being one of Australia’s most antagonistic and financial planners and others in the financial services indus...Read more




Seems there is a difference between theft of investments and inappropriate advice. Still leaves the old problem of how AFCA determine what is inappropriate advice. If only they published guidelines or used a known investor risk profile or clearly stated how they measure investor risks profiles????

Add new comment