In another round of uncovering poor advice, the AFR is reporting that ASIC will look closely at SMSFs that invest in property.
After doing a random sample of 250 cases, ASIC found that 90% didn’t comply with legal obligations or the best interest test.
This may be unsurprising to some readers considering Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and AMP Limited (ASX: AMP) are under fire from the Royal Commission for advice-related scandals. Now it’s the turn of other advice-giving businesses with conflicts of interest.
ASIC said that people who had been advised by property one-stop shops had been put into a high risk strategy. There is an inherent conflict of interest and in many cases it resulted in the financial detriment of SMSF members according to ASIC.
The ATO and ASIC will focus on property one-stop shops by sharing data and intelligence, with ASIC taking action against unscrupulous behaviour.
According to ASIC, 10% of the files it looked at showed that the person would be significantly worse-off in retirement due to the advice.
What to learn from this
Most people don’t seem to bother thinking about risks or problems with anything they’re presented with. For some reason having a conflict of interest doesn’t seem to indicate a big red flag.
I think it’s a real poor state of affairs that so many Australians have little understanding of finances and then, on top of that, there is a group of advisors, as ASIC has found, out there who are doing the best for themselves and taking advantage of people.
You just need to see how people are incentivised to see what will motivate them to act what will best reward them.
It’s worth questioning anyone selling you the advice and the product like the one-stop shops that ASIC has investigated. There are some good independent ones out there, but there are also some ones you shouldn’t trust your money with.
That’s a big reason why I prefer shares. There are little fees associated with buying, maintaining and selling them yourself.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.