I’ve heard all the bad news and the bad reviews,
Sabrina Carpenter, when asked why so many of her clients are in SMSFs.
All the friends tryna save me, well, I cut them loose,
‘Cause I refuse to be wrong again.
ASIC’s Report 824 (REP 824), published on 6 November 2025, presents a targeted risk-based review of personal advice provided to retail clients on the establishment of self-managed superannuation funds (SMSFs). Drawing on a sample of 100 client files from 19 licensees, the report exposes widespread non-compliance with the Corporations Act 2001 (Cth), particularly in relation to the best interests duty, conflicts management, and appropriate client documentation.
Of the 100 files reviewed, ASIC determined that 62 failed to comply with the best interests duty, with 27 of these involving advice that caused or risked causing significant client detriment. In 24 of those high-risk cases, the adviser appeared to prioritise their own or their licensee’s interests over the client’s. The report also found that of the 47 files subject to pre-vetting procedures, 33 still failed to meet legal obligations, raising serious questions about the effectiveness of internal compliance systems.
The context is particularly concerning given the growth trajectory of the SMSF sector, which now holds approximately $1.1 trillion in assets. ASIC reiterated the consequences of systemic advice failures through its reference to Shield and First Guardian, where poor advice and inappropriate SMSF structures directly contributed to consumer harm.
The findings hold significant implications for Responsible Managers, compliance officers, and licensees. ASIC’s messaging is unequivocal: the quality of SMSF advice must materially improve, or the sector risks regulatory intervention, reputational damage, and client loss. ASIC cited the collapses of Shield and First Guardian as stark reminders of poor advice and high-risk investments leading to financial harm.
To address these failings, ASIC published eight action points for advisers and four for licensees. It has signalled potential enforcement action where breaches are significant. See “What does REP 824 mean for the SMSF sector?” below for the full call‑out box of all 12 action points.
This report holds critical compliance and governance implications for licensees, responsible managers, and advisers. It underscores the need for robust advice processes, effective oversight, and prioritisation of client interests in SMSF establishment advice.
Clarification of terms
Self-Managed Superannuation Fund (SMSF): A private superannuation fund regulated by the ATO where members are also trustees. SMSFs provide greater control but carry substantial responsibilities and risks. See Moneysmart guidance here.
Best Interests Duty: A statutory obligation for financial advisers to act in the best interests of clients when giving personal advice. Governed by s 961B of the Corporations Act 2001 (Cth).
Client Detriment: Situations where the advice provided leads to worse financial outcomes for the client, including loss of consumer protections or higher costs.
Advice Licensee: An Australian Financial Services (AFS) license holder responsible for authorising financial advisers and supervising advice conduct. See s 911A of the Corporations Act (Cth).
Pre-Vetting: A compliance control where advice documents are reviewed by a licensee or compliance officer before being finalised and provided to the client.
Conflict of Interest: Occurs where an adviser’s or licensee’s personal interests may improperly influence advice. Governed by s 961J of the Corporations Act 2001 (Cth).
Shield and First Guardian Collapses: High-profile financial failures involving unsuitable advice and risky superannuation investments, cited by ASIC as worst-case examples.
Sample Size: This is the number of files included in the report. In REP 824, the sample size was 100 files. This is not a big enough sample size to be representative of the industry as a whole, so we need to be cautious when interpreting ASIC’s findings. The real state of affairs could be much better (or much worse!) than the report indicates.
Five questions about SMSF failures
How many SMSF advisers failed to satisfy their best interest duty?
ASIC’s review revealed a persistent failure by advisers to meet their statutory obligations under s 961B of the Corporations Act. Of the 100 advice files reviewed, 62 failed to demonstrate compliance with the best interests duty, with some advice leading to significant client risk. This finding reflects a deep-rooted issue in advice practices concerning SMSF establishment, where compliance is not merely procedural but linked to real-world financial harm.
The low compliance rate raises red flags for governance and oversight mechanisms across licensees. These failures are not isolated instances but indicative of a wider culture of inadequate documentation, templated advice, and poor client-tailoring. ASIC’s references to the failures of Shield and First Guardian serve as cautionary case studies on the downstream effects of substandard advice. These findings suggest that ASIC will likely use its regulatory powers more assertively in future reviews.
Quoted Evidence:
“Of the 100 client files we reviewed:… in 62 files, the financial adviser failed to demonstrate compliance with the best interests duty and related obligations”. [REP 824, p. 6]
“Barely a third of advice files – 38 of 100 – demonstrated compliance with the longstanding obligation for advisers to act in the clients’ best interests”. [25-265MR]
“Collapses like those involving Shield and First Guardian show us the worst-case scenario for what happens when people receive poor advice to switch superannuation funds and make high-risk investments”. [Commissioner Kirkland, 25-265MR]
Implications:
These widespread failures are likely to mean increased legal and regulatory risk for advisers and Licensees, including potential breach reporting obligations. ASIC’s findings highlight that inadequate supervision and poorly documented advice processes can expose both parties to enforcement action, civil penalties, or AFCA complaints if systemic deficiencies remain unaddressed.
The high incidence of failures to meet this core obligation highlights gaps in adviser training, record-keeping, and rationale for SMSF suitability. Many files failed to demonstrate informed client consent or a clear rationale for recommending SMSF establishment, indicating weaknesses in adviser competence and the practical application of the best interests duty.
These persistent compliance breakdowns signal systemic governance failures in advice oversight requiring immediate remediation by Responsible Managers. These include insufficient quality assurance checks, ineffective escalation procedures, and limited root-cause analysis of compliance breaches. Licensees must review monitoring frameworks, retrain staff, and implement consistent remediation and breach reporting to mitigate ongoing risk.
These findings also suggest ASIC may escalate enforcement under its 2025 priorities. Non-compliant Licensees risk enforceable undertakings, remediation programs, and reputational damage where systemic breaches are confirmed.
Related Law: s 961B Corporations Act 2001 (Cth)
Related Article: The “Best Interests Duty”: Dixon trumps Levy
How widespread was client detriment in SMSF advice?
ASIC identified that over one in four SMSF establishment advice files (27%) raised serious concerns about client detriment. This statistic indicates not just a failure in technical compliance but real, measurable harm to clients, many of whom moved out of APRA-regulated funds without a clear understanding of the consequences. Clients in these scenarios may face greater fees, inadequate insurance, and fewer avenues for redress.
The report underscores that advisers frequently failed to contextualise the client’s capacity to manage an SMSF, or to articulate the trade-offs in consumer protections lost. The recommendations appeared to favour SMSF structures regardless of suitability, hinting at conflicts of interest. ASIC’s framing of this issue makes clear that the duty to avoid client harm is not just about disclosure—it is about judgment, evidence, and prioritising the client’s financial outcome.
Quoted Evidence:
“27 files – over a quarter – raising significant concerns about client detriment relating to recommendations to set up an SMSF”. [25-265MR]
“People who move their super from an APRA-regulated fund to an SMSF also lose important protections, including the benefits of prudential regulation and the ability to make a complaint about the fund or its trustees to AFCA”. [25-265MR]
Implications:
These findings highlight potential exposure to AFCA complaints and civil liability for both advisers and Licensees. Poor SMSF advice that leads to financial loss or unsuitable outcomes could trigger dispute resolution processes or enforcement action if evidence of non-compliance with statutory duties is found. ASIC’s focus on consumer harm means advisers can expect increased scrutiny of advice rationale and documentation.
The high number of clients unaware of the critical loss of superannuation protections underscores a broader communication and disclosure failure. Many clients moved from APRA-regulated funds without understanding the implications for insurance, compensation schemes, and complaint rights. This reflects a systemic advice gap where clients were not adequately informed about the risks, costs, or responsibilities associated with SMSFs, exposing Licensees to remediation obligations and potential reputational harm.
These widespread disclosure failures are likely to drive new ASIC guidance or targeted surveillance campaigns. Licensees must strengthen adviser training, reinforce comparative analysis obligations, and update compliance templates to include explicit evidence of consumer understanding.
Related Law: s 912A Corporations Act 2001 (Cth)
Related Article: In the new breach regime, what are the AFSL’s core obligations?
Why didn’t prevetting stop poor SMSF advice?
Despite procedural controls such as pre-vetting of advice, ASIC found that 33 of 47 files subjected to these reviews still failed to meet the best interests test. This suggests that even where licensees have instituted compliance safeguards or AI-focused solutions, those processes are failing to function effectively. It suggests that pre-vetting has become a check-box exercise, rather than a substantive filter to ensure compliant and tailored advice.
This finding undermines confidence in the assurance layers meant to protect consumers before advice reaches them. It also reflects a disconnection between compliance theory and operational execution—where policies exist on paper but do not translate into meaningful conduct change. ASIC’s reminder for advisers and licensees to reflect deeply on these findings suggests that further intervention may occur if internal controls are not improved.
Quoted Evidence:
“33 of the 47 files that contained records of pre-vetting still indicat[ed] a failure to comply with the best interests duty”. [25-265MR]
“Despite some licensees requiring advice to be pre-vetted before reaching clients, non-compliant advice continued to slip through the cracks” [25-265MR]
“The report we are releasing today contains 8 action points for advisers and 4 action points for licensees to improve their practices when it comes to SMSF establishment advice. All advisers and licensees should carefully consider the findings of our review” [25-265MR]
Implications:
These results reveal that prevetting frameworks, while designed to prevent poor-quality advice, have become procedural rather than protective. Many Licensees relied on template reviews or automated checks rather than holistic evaluations of client context. This approach leaves compliance blind spots and increases exposure to systemic advice failure.
These weaknesses indicate a need for comprehensive audits and the redesign of pre-vetting and QA systems. Licensees must align vetting criteria with ASIC’s expectations in INFO 274. They should also consider implementing scenario-based testing, reviewer competency assessments, and escalation of repeated adviser errors.
The prevalence of failures despite prevetting highlights an urgent need for cultural reform within compliance teams. Licensees should treat prevetting as a strategic control that protects clients and reduces enforcement risk, not as an administrative hurdle.
These systemic issues may lead ASIC to target QA and prevetting controls in its next surveillance round. Enhanced quality assurance, training of reviewers, and accountability mechanisms for compliance staff will be critical to satisfying s 961L obligations.
Related Law: s 961L Corporations Act 2001 (Cth)
Related Article: “A Cavalier Attitude”: ASIC, Doyle & RI Advice
How were conflicts of interest mishandled by SMSF advisers?
In 24 of the 27 cases involving client detriment, ASIC found evidence that advisers did not place the interests of their clients ahead of their own, or those of their licensees. This is a direct breach of s 961J and highlights an entrenched conflict of interest issue across the industry. These failures were not marginal but systemic and correlated with poor outcomes.
The report also identified a culture of order-taking, where advisers acted as transactional facilitators rather than professional fiduciaries. This behaviour undermines consumer trust in the advice sector and invites regulatory scrutiny. Advisers must be able to demonstrate not only that they have identified conflicts but that they have actively managed or avoided them to uphold client interests.
Quoted Evidence:
“In 24 of the 27 client files that raised concerns about client detriment, ASIC was concerned that the financial adviser failed to prioritise the interests of the client above their own interests or that of their advice licensee or an associate”. [25-265MR]
“Financial advisers should be providing their clients with rigorous, well considered advice”. [25-265MR]
Implications:
These findings demonstrate material breaches of adviser duties under s 961J, showing that advisers frequently failed to prioritise clients’ interests over commercial incentives. Such breaches expose advisers and Licensees to breach reporting, civil penalties, and reputational damage.
These systemic failures in managing conflicts of interest reveal a lack of independence and ethical governance. Advisers operating under conflicted remuneration or referral arrangements risk undermining consumer trust and breaching fiduciary expectations. Licensees must urgently review remuneration structures, third-party referral policies, and internal conflict registers.
These repeated failures indicate broader cultural issues, where advisers view themselves as order-takers rather than fiduciaries. ASIC has signalled a tougher stance, and enforcement action for conflict-related breaches is likely to escalate, including penalties or licence conditions for repeat offenders.
These lapses also require corrective governance reform. Licensees should mandate conflict-specific training, implement centralised oversight tools, and document clear conflict resolution pathways to ensure compliance with s 961J and s 912A obligations.
Related Law: s 961J Corporations Act 2001 (Cth)
Related Article: Conflicting views: Identifying interests and influences
Why is ASIC worried about the growth of the SMSF sector?
The SMSF sector continues to expand rapidly, with $1 trillion in assets and a sharp increase in new fund establishments in the year to June 2025. This growth brings a proportional increase in the number of consumers exposed to potential harm from poor-quality advice. As more Australians seek control of their super, the sector becomes a magnet for opportunistic or underprepared advisers.
ASIC warns that without a material improvement in advice quality, the consequences of this expansion could be severe. Retail clients entering SMSFs often lack the experience or risk appetite to manage complex investments. Without rigorous, client-specific advice, the current trend poses a structural risk to retirement adequacy and undermines the integrity of the financial advice ecosystem.
Quoted Evidence:
“The SMSF sector in Australia is growing, accounting for around $1 trillion, or nearly a quarter, of the $4.3 trillion superannuation sector” [25-265MR]
“In the year to June 2025, 41,980 new funds were established, an increase from 33,032 establishments the previous year”. [25-265MR]
Implications:
These findings illustrate that as the SMSF sector expands, so too does the risk of poor advice and financial harm. A larger pool of unsophisticated retail investors entering SMSFs increases the likelihood of systemic consumer detriment and regulatory intervention.
This surge in SMSF establishment underscores the urgent need for adviser education and tighter gatekeeping. Advisers must be trained to assess suitability thoroughly, articulate comparative risks, and clearly explain trustee obligations. Licensees should integrate balance thresholds, gearing limits, and insurance continuity into preadvice assessments.
These industrywide growth patterns highlight ASIC’s concern that inadequate oversight could threaten retirement adequacy and sector integrity. Without cultural and procedural reform, the SMSF sector risks reputational erosion and heightened enforcement.
These trends are likely to prompt ASIC to expand its surveillance on SMSF advice practices and push for alignment with broader superannuation regulatory frameworks. Licensees who invest early in compliance innovation—through digital monitoring and enhanced file reviews—will mitigate future enforcement exposure.
Related Law: Superannuation Industry (Supervision) Act 1993 (Cth)
Related Article: ASIC and SMSF: More than checklists
How should advisers and licensees react to REP 824?
ASIC’s findings in REP 824 underscore a systemic breakdown in both the provision and supervision of SMSF advice. The sector’s rapid growth, combined with the complexity of SMSFs and the vulnerabilities of retail clients, has outpaced the maturity of compliance systems and the professional judgement of many advisers. This has resulted in poor outcomes and regulatory exposure that threatens both consumers and the reputation of the advice industry.
The seriousness of the review’s findings warrants a deeper and more urgent compliance response. The failure to appropriately consider SMSF suitability, ineffective pre-vetting, and poor conflict management point not just to individual adviser misconduct, but to structural governance weaknesses. ASIC’s expectation is clear: both cultural and operational reform is required, underpinned by rigorous risk management and demonstrable adherence to legal obligations.
Legal and Regulatory Analysis
Advisers breached s 961B and s 961J duties, undermining the integrity of the personal advice regime and exposing clients to material harm.
Licensees’ failure to implement effective monitoring, supervision, and conflict protocols suggests breaches of s 912A(1)(a), (ca), and (f).
ASIC’s use of enforcement in cases like Equiti Financial Services ($11M penalty) demonstrates increasing appetite to sanction ‘cookie cutter’ advice and conflicted practices.
Recommendations for Licensees
Action: Conduct a risk-weighted audit of SMSF establishment files issued within the past 12 months.
Legal Basis: s 912A Corporations Act — obligation to ensure compliance and provide adequate supervision.
Implementation: Apply pre- and post-vetting sampling protocols; escalate high-risk files (e.g. property LRBAs, low balances) for external review. Embed INFO 274 checks into QA processes.
Recommendations for Advisers
Action: Complete structured CPD on SMSF trustee obligations, insurance implications, and comparative fund analysis.
Legal Basis: s 961B Corporations Act — duty to act in the client’s best interests.
Implementation: Use file templates that record ‘why not an APRA fund’ reasoning; require peer review before recommending high-risk structures like property via LRBA.
Recommendations for Responsible Managers
Action: Integrate SMSF establishment risk metrics into monthly compliance dashboards and licensee-level risk registers.
Legal Basis: s 961L Corporations Act — obligation to ensure representatives comply with their obligations.
Implementation: Develop triggers for compliance review based on adviser file volume, balance size, use of gearing, or referral sources. Mandate quarterly training on SMSF enforcement trends and INFO 274 alignment.
What does REP 824 mean for the SMSF sector?
To address these issues, REP 824 sets out 12 key actions—eight for advisers and four for licensees—to improve SMSF advice outcomes. ASIC has flagged these areas as future enforcement priorities and expects licensees to undertake immediate remedial action.
REP 824: 12 action points
For advisers (8)
- Do not mis‑sell SMSFs on the basis of “control”.
- Assess SMSF suitability using INFO 274 factors.
- Do not recommend an SMSF if it exposes the client to unnecessary or inappropriate risks.
- Prioritise the client’s interests over those of the adviser, licensee or associates.
- Consider the client’s need for suitable, affordable insurance (especially with LRBAs).
- Clearly document the basis for advice (why an SMSF is appropriate).
- Exercise professional judgement when assessing suitability.
- Keep comprehensive records showing how obligations were met.
For licensees (4)
- Embed SMSF suitability factors (incl. INFO 274) in policies and procedures.
- Maintain robust records of advice and how BID and related obligations were met.
- Ensure effective monitoring and supervision (e.g. risk‑based, robust pre‑vetting).
- Maintain and enforce effective conflicts‑of‑interest policies and procedures.
ASIC’s review in REP 824 reveals critical deficiencies in the provision and oversight of SMSF establishment advice. It demonstrates a widespread failure to meet core statutory obligations, notably the best interests and conflicts duties. As the SMSF sector grows, these shortcomings expose more Australians to avoidable financial harm.
Advisers and licensees must heed ASIC’s guidance, including the twelve action points published alongside REP 824. Proactive compliance, cultural reform, and system upgrades are essential to rebuilding trust in the advice sector.
Regulatory scrutiny of SMSF advice is set to intensify. Responsible Managers and Licensees must act now to reinforce advice quality, reduce legal exposure, and ensure that Australians’ retirement savings are not left at risk.
For pre-vetting assistance, or to check that your monitoring and supervision strategies pass muster, contact Assured Support.
If you enjoyed this article, you might also like:
- ASIC and SMSF: More than checklists
- The “Best Interests Duty”: Dixon trumps Levy
- “A cavalier attitude”: ASIC, Doyle and RI Advice
Frequently Asked Questions
Q: What does ASIC’s REP 824 reveal about SMSF advice quality?
REP 824 found that 62% of reviewed advice files failed to meet best interests obligations, with widespread governance and documentation gaps exposing clients to avoidable risk.
Q: Which laws underpin ASIC’s findings?
Breaches related primarily to ss 961B (best interests), 961J (conflicts), and 912A (licensee supervision) of the Corporations Act 2001 (Cth).
Q: How should advisers improve SMSF suitability assessments?
Apply ASIC INFO 274, document “why not an APRA fund,” and record client understanding of SMSF responsibilities and loss of consumer protections.
Q: What risks do licensees face after REP 824?
Licensees risk enforcement, enforceable undertakings, or AFCA remediation if monitoring and pre-vetting systems remain ineffective.
Q: What immediate steps should Responsible Managers take?
Conduct a 12-month risk-weighted audit of SMSF files, update QA frameworks, and mandate CPD on trustee obligations and conflicts management.
