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SMSF supervisory regime needs safeguards
More 'mum and dad' investors could mistakenly end up in self-managed super funds (SMSFs) under the Government's draft proposal for a replacement to the accountants' exemption, according to the Association of Superannuation Funds of Australia (ASFA).
ASFA said the proposal limited authorisation to give financial advice related to an SMSF or advice on super products, and could affect the assessment of whether someone would be better off switching to an SMSF.
"An authorisation limited to SMSFs may mean that there is no obligation on the accountant to assess whether or not a person is better off in an SMSF compared to their current fund or product, as they do not have the authorisation to give advice on other products," it said.
Claims from people who had been improperly moved into an SMSF had increased, according to the Financial Ombudsman Service (FOS) and a number of legal firms, ASFA said.
The industry body called for a rewording of the draft to allow advice to be given across superannuation products including SMSFs and Australian Prudential Regulation Authority-regulated funds.
ASFA also called on the Government to issue regulatory guidance, including the disclosure of specific risks, in relation to advice on SMSFs.
It said commercial relationships that had arisen from the purchase of property under limited recourse borrowing arrangements did not operate under an Australian Financial Services Licence (AFSL), because property was not regulated as a financial product under the Corporations Act.
It meant purchases were not subject to best interest duty or disclosure of conflicts and remuneration, ASFA said.
"With the growth in SMSFs and the potential for unsophisticated clients to take up SMSFs, it is important that greater consumer protections be put in place," it said.
ASFA said the pooled superannuation industry and other financial service providers had had limited time to comply with new requirements under Future of Financial Advice reforms and Stronger Super legislation.
It said a one-year transition period for the move to the accountants' exemption replacement should be sufficient, as the change is based on existing law.
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