A recent article on Independent Financial Advisor highlights industry concerns that constant meddling from ASIC into the advice sector, particularly in relation to SMSF’s is having undesirable results or unintended consequences.
An excerpt from the article reads
“When the accountants exemption was repealed in 2016, it appears that ASIC was laboring under a bizarre belief that SMSF trustees would trust and voluntarily choose to pay for licensed advice under a framework riven with scandal and, in relation to which, the holding of a licence provided no impediment to unethical conduct,” he said.
“If ASIC removed the exemption to improve the quality of advice received by SMSF trustees it has failed. In fact, it has increased the risk that trustees will not receive any advice other than tax advice.”
This comes hot on the heels of the backflip from former ALP Minister Bernie Ripoll in June where he acknowledged not all commissions are bad when discussing the success of the mortgage broking industry in fighting the quite outrageous suggestion from the Hayne Royal Commission suggesting the ban of commissions in the sector. Bernie Ripoll will front a campaign aimed at convincing policymakers to allow life insurance advisers to keep commissions. Major insurer AIA will run advertisements warning that changes to superannuation laws next month will leave some workers without cover.
Mr Ripoll, who in 2009 chaired the inquiry that led to the Future of Financial Advice laws that banned upfront and trailing commissions in financial advice, said the victory by mortgage brokers proved that “not all commissions are bad”.
“Outright banning of commissions may appeal to some but raises the obvious question, who will pay for the advice that consumers need when deciding the appropriate product and level of cover?”
It seems incredible that it took 10 years for Mr Ripoll to ask himself this very question as a generation of Australian likely become under-insured as a result of their unwillingness to pay for the appropriate advice that was previously provided to the clients at no charge, with insurers picking up the tab via up front and trailing commissions.
As a Labor MP, Mr Ripoll chaired the parliamentary inquiry that led to the FOFA legislation that banned conflicted remuneration and required financial planners to meet a “best interests duty”.
A concession by the then Labor government allowed pre-2013 arrangements to continue; they were grandfathered.
The belief was that old arrangements would simply lapse, solving the problem over time.
But the royal commission heard examples of ongoing problems with conflicted remuneration and legislation to end grandfathering has been drafted. Mr Ripoll said he did not regret allowing some products to be grandfathered.
Life insurance was excluded from FOFA because of concerns over under-insurance. Commissioner Hayne was unconvinced by such claims, despite overwhelming evidence across multiple industries to the contrary.
This latest research underlines a key point in SMSF investing. Investors set up SMSF’s to control their own Nest Egg and trust their own investment strategies, which is the primary definition of the ‘self managed’ aspect of an SMSF.