Bengaluru – Australia’s securities watchdog has issued a new warning about the risks posed to retirement savings by poor advice on self-managed superannuation funds (SMSFs). According to the Australian Securities and Investments Commission (ASIC), more than a quarter of the reviewed cases revealed advisers giving recommendations that could seriously jeopardize Australians’ retirement nest eggs.

In its latest review, ASIC found that 27 out of 100 cases involved advice on establishing SMSFs that posed “serious harm” to clients’ long-term retirement savings. Furthermore, approximately 62% of the cases failed to meet legal obligations to act in the best interests of clients. Only 38% of advice files were found to reflect recommendations aligned with clients’ best interests.

Understanding Self-Managed Superannuation Funds (SMSFs)

SMSFs are a unique type of retirement fund in which participants manage their own investments rather than relying on large, professionally managed industry or bank-run superannuation funds. The SMSF sector accounts for roughly 25% of Australia’s A$4.3 trillion ($2.79 trillion) superannuation market, highlighting its significant role in the national retirement savings landscape.

While SMSFs offer individuals greater control over investment decisions, ASIC’s review emphasizes that they are not suitable for everyone. Many investors underestimate the complexity and responsibility involved, exposing themselves to considerable financial risks if guided by inappropriate advice.

Increased Regulatory Scrutiny

ASIC’s findings come amid heightened scrutiny of the superannuation and fund management sector, following the collapse of certain funds, including the Shield Master Fund in 2024 and the First Guardian Master Fund earlier this year.

“People often set up an SMSF because they think it will give them more control over their retirement savings, but they aren’t suitable for everyone,” said ASIC Commissioner Alan Kirkland. He added, “Financial advisers who recommend that clients establish SMSFs without properly considering their objectives, financial situation, and personal needs are not helping clients take control of their future—they are placing it at risk.”

Misleading Advertising Penalties

In addition to issues with SMSF advice, ASIC has recently targeted misleading advertising practices in the superannuation sector. H.E.S.T. Australia, trustee of the HESTA super fund, paid a A$37,560 penalty over advertisements that made misleading claims about its commitment to eliminate carbon emissions. Similarly, Prime Super was fined A$18,780 for infringing ASIC rules related to misleading claims about tobacco investments.

These enforcement actions underscore ASIC’s commitment to ensuring transparency, integrity, and compliance within the Australian superannuation and financial advice ecosystem.

What This Means for Australian Investors

For Australians considering an SMSF, the ASIC review serves as a cautionary reminder that retirement planning is complex, and poor advice can have long-lasting consequences. Investors are encouraged to:

• Assess whether an SMSF is suitable for their personal financial objectives and risk tolerance.
• Seek professional financial advice that aligns with their best interests.
• Be vigilant about advertisements and claims made by superannuation providers.

As the SMSF sector continues to grow, these measures are critical in protecting retirement savings for millions of Australians and maintaining confidence in the country’s retirement system.