Crackdown urged on SMSF rogues
Major accounting and planning firm Chan and Naylor has called for a crackdown on what it describes as "rogue self-managed superannuation fund advisers" emerging out of the current surge in SMSF start-ups.
Chan and Naylor director of financial planning David Hasib said the establishment of SMSFs had "become a goldmine for opportunist marketers, highlighting serious and potentially devastating loopholes in the regulatory system".
He warned that, thus far, scrutiny had been directed to the role of SMSF trustees, with little or no attention being cast over the wider industry "including those developing the products and many under-qualified advisers, or even the growing number of promoters with no qualifications".
Hasib said all these parties needed to share responsibility for creating an environment of risk decision-making - something which was placing increasing numbers of investors in dire financial straits.
He claimed that while Australia's financial landscape had grown dramatically in diversity and complexity over the years, the education requirements for advisers had lagged.
"It should not be acceptable to play the role of financial adviser in the general sense; the industry is evolving so quickly that it requires specialised advisers that are up to date and add real long-term value to clients," Hasib said.
He said that, currently, anybody could promote SMSFs to potential investors, with rogue advisers failing to alert investors to pitfalls such as whether they have sufficient money for the fund to be beneficial, what investment options are available and most suitable, and trustees' roles and responsibilities.
Hasib advocated the imposition of key compliance guidelines for advisers including:
- Ensuring each adviser holds a Diploma or (preferably) Advanced Diploma in Financial Planning, including a sub-competency in SMSFs;
- Increasing Continuing Professional Development (CPD) hours from 30 to 40 hours a year in line with Financial Planning Association requirements, with relevance to the adviser's core specialist area (ie, SMSF); and
- Introducing a mandatory yearly exam to ensure advisers' knowledge is up to date with current changes in law and legislation.
"Penalties should be put in place for those continuing to advise without the required qualifications," he said. "The law must be strong enough to impose penalties that compensate the client, ensuring enforceable undertakings by the adviser to bring them up to speed".
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