ASIC surveillance found CMH had failed to provide advice on SMSFs that was appropriate and in clients' best interests, according to an announcement released yesterday.
The statement said ASIC's surveillance identified examples where financial product advice given to clients about SMSFs did not demonstrate that the advice provider had acted in clients' best interests and did not comply with product replacement advice disclosure obligations.
ASIC said it found that the SMSF advice included advice to establish SMSFs where the starting balances were below $200,000, which in ASIC's view, taking into account the impact of CMH's fees, was not in the best interests of clients.
Further, ASIC said the clients were advised to engage in high-risk gearing strategies that appeared to be inappropriate given their specific circumstances and limited investment experience.
ASIC also stated there was inadequate monitoring and supervision of representatives by CMH, particularly in relation to its obligation to ensure representatives are adequately trained and competent to provide SMSF advice.
In addition, ASIC stated it was concerned about the adequacy of risk management arrangements, adequacy of arrangements to manage conflicts of interest and procedures for ensuring the SMSF advice provided to clients did not contain false or misleading statements inducing them to deal in a financial product.
In response to ASIC's concerns, ASIC said CMH has agreed to appoint an independent expert to undertake a program of pre-vet and audit reviews to test the compliance of SMSF advice prepared on behalf of CMH.
Further, the independent expert will also review CMH's conflict management arrangements and measures for monitoring and supervising representatives. The independent expert will report to ASIC and CMH, and CMH will be required to address any deficiencies identified by the review.
ASIC said that under the EU, CMH will also require all advisers providing SMSF advice to clients to complete specialist SMSF training.
“Advice providers need to ensure their processes and documentation demonstrate they have acted in the best interests of their clients,” said ASIC deputy chair Peter Kell.
“Setting up an SMSF is a significant financial step for consumers and many factors can impact their decision. It is therefore important that consumers receive quality, compliant advice that will assist them in making informed decisions about their retirement savings.”
Process standardisation trumps automation
By Mark Sands, BOARD Australia
Tips for mergers and acquisitions of accounting fees
By Jamie Davison, Carbon Group
Turning year-end conversations into advisory work
By Tracey Loubser, Confident Cashflows PLUS