ASIC has updated its guidance on the provision of SMSF advice with the publication of Information Sheet 274 Tips for giving self-managed superannuation fund advice (INFO 274). This information sheet helps Australian financial services (AFS) licensees and their representatives comply with their obligations when providing personal advice about self-managed superannuation funds (SMSF).
SMSFs are an important part of the superannuation sector with approximately $865 billion of assets currently held in SMSFs.[1] Financial advisers play a key role in advising consumers on whether or not an SMSF is suitable for them. They must consider a range of important factors.
Reflecting this, key changes made in INFO 274 and on ASIC's Moneysmart's SMSF webpage include:
- highlighting SMSF risks and the importance of seeking professional advice
- ensuring comparisons about SMSFs and Australian Prudential Regulation Authority (APRA) regulated funds remain relevant and up to date
- removing guidance about a minimum balance for an SMSF reflecting that balance alone is not the driving indicator of suitability as illustrated in new case studies in INFO 274
- consolidation of existing guidance in INFO 205 and INFO 206.
Background
This year, ASIC undertook a review of our guidance on SMSF advice. This included our statements about SMSF balances as well the performance comparisons of SMSFs compared to APRA-regulated funds. The review aligns with ASIC's key strategic priorities of protecting consumers as they plan their retirement decisions (see ASIC's Corporate Plan 2022-26).
As part of this review, we engaged with industry participants. The new INFO 274, incorporates feedback from industry including that our guidance on SMSF advice should be simplified. INFO 274 consolidates and replaces two previous information sheets:
- Information Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks (INFO 205) and
- Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206).
SMSF Balances
Superannuation balance, whether high or low, while important, is only one factor when considering whether an SMSF is suitable for a client. Other important factors include the risks and costs associated with setting up and/or switching to an SMSF, investment strategies, diversification, liquidity, asset choice, trustee responsibility and time-commitment and the potential benefits of professional advice when deciding to set up and/or switch to an SMSF.
In response to feedback received from ASIC's targeted industry consultation, ASIC has provided case studies in an attachment to INFO 274 to illustrate that an SMSF balance is only one factor a financial adviser should consider when determining whether an SMSF is suitable for their client.
Financial advisers may also consider resources available on the ATO's website about setting up and running an SMSF when determining whether an SMSF would be suitable for their client.
Comparing SMSFs to APRA-regulated funds
There are a number of factors that need to be considered when comparing the performance of SMSFs to APRA-regulated funds. For example, the considerable structural differences, investment options available and investment return calculation methodologies adopted can make it challenging to compare performance of SMSFs to APRA-regulated funds.
Clients should understand the costs, risks and the trustee responsibilities that they would take on in setting up an SMSF and how this compares to their existing APRA-regulated fund. A financial adviser can assist clients with making an informed decision about whether an SMSF is the right retirement savings vehicle for them.
[1] APRA releases superannuation statistics for September 2022 | APRA
Further Information
- Information Sheet 274 Tips for giving self-managed superannuation funds advice (INFO 274)
- Self-managed super funds (SMSF) - Moneysmart.gov.au
