ASIC advisory: purchasing shares with superannuation

The recent ASIC review of SMSF advice revealed a number of areas for improvement in the advice-giving process.

Given the risks associated with a DIY option, ASIC has issued guidelines on the things advice providers and investors should discuss and consider before setting up an SMSF.

They outline some practical tips that advice providers can use to improve the quality of SMSF advice they provide to investors.

ASIC set out a scenario as to appropriate advice when it came to a SMSF investing in shares:

An investor approached an advice provider about purchasing listed shares with their superannuation.

The investor’s existing superannuation fund did not provide this option so the investor sought advice about an appropriate alternative that would allow them to purchase listed shares.

The investor undertook their own research and selected a portfolio of blue chip shares that they intended to buy and hold as a long-term investment.

The advice provider determined that the investor was not nearing retirement and was correctly prioritising the repayment of their mortgage.

The advice provider appropriately scaled the advice to the recommendation of a superannuation account that suited the specific needs of the investor.

Commentary:

The advice provider determined that the needs of the investor were not complex and identified an APRA-regulated superannuation fund that offered all of the features that the investor required at a competitive price.

The advice provider also considered an SMSF for the investor, but decided that it would not be suitable, given that the investor was looking for a simple option and had no desire to be actively involved in the administration of the fund.

The advice provider appropriately recommended the APRA-regulated fund to the investor.