A SURVEILLANCE campaign is commencing to assess how financial advisers are complying with new anti-churn legal requirements.
The requirements relate to advice to switch financial products and have been put into the Financial Services Reform Act to discourage misselling and unnecessary churning.
The Australian Securities and Investments Commission anticipates an increase in adviser recommendations to change superannuation funds once Choice of Fund legislation starts to operate from July 1 next year.
Financial advisers are required to disclose conflicts of interest, adviser remuneration and any limitations that affect their recommendations.
The additional obligations for advisers recommending a change of fund include:
• Comparing a person’s existing fund with the recommended fund;
• Specifically disclosing the costs, loss of benefits and other significant consequences of making a switch; and
• Ensuring any recommendation to change funds is appropriate for the client and is not misleading.
ASIC will also use the campaign to consider the appropriateness of advice given to establish self-managed superannuation funds.