The Federal Government should mandate the Financial Adviser Standards and Ethics Authority (FASEA) to increase self-managed superannuation fund (SMSF) education and advice standards, according to the SMSF Association.
The SMSF Association has used a pre-Budget submission filed with the Treasury to argue that raising education standards for SMSF advisers would serve the dual purpose of increasing their knowledge related to specific and complex legislation while discouraging advisers who give SMSF advice but have not undertaken specialist training.
“For example, there will be many situations where financial advisers who are licensed to give SMSF advice may have not have many SMSFs in their portfolio of clients,” it said. “These individuals may not have the required level of expertise and experience to deal with complex SMSF issues when they arise infrequently in their working life, yet they are not forced to seek expert support.”
“An SMSF education licensing requirement to provide SMSF advice in this situation would either force the adviser to complete specialist education requirements to advise their SMSF clients or encourage SMSF members to seek licensed advisers whom deal with SMSFs and the specialist issues involved on a regular basis,” the SMSF Association submission said.
“Introducing an SMSF education requirement, would also limit advisers who are licensed but have poor knowledge of SMSFs and limited recourse borrowing arrangements from advising on the product,” it said. “In turn it then discourages property spruikers from entering the SMSF advice market as the education requirement could be too high.”
“Understandably, the SMSF Association notes education cannot entirely prevent poor and misleading advice, but along with the implementation of other policy measures, it will provide a safeguard for SMSF members from advisers who potentially lack the required knowledge to provide the specialist advice needed for SMSFs.”
Furthermore, a requirement to seek specialist SMSF advice would restrict the current practice we see in ‘one-stop property shops’ which the ASIC Report 575 notes as a detrimental path to inappropriate limited recourse borrowing arrangements.