Experienced financial adviser readers of Financial Newswire have drawn parallels between the Australian Securities and Investments Commission’s (ASIC) Report 824 on self-managed superannuation (SMSF) establishments to its 2014 Report 413 on life insurance.
They have claimed that both REP 824 and REP 413 are based on targeted reviews undertaken by ASIC, rather than a broad sampling of advisers.
The concerns about the similar bases of the two reports is that REP 413 was picked up by the former Labor Government as a confirmation of poor advice practices and, ultimately, gave rise to the introduction of the Life Insurance Framework (LIF).
On the face of it, the similarities between the two reports are striking with ASIC in 2014 basing its findings on a review of 202 advice files while the case of REP 413, the regulator reviewed 100 advice files.
In 2014 it found the following: “Of the 202 files in our sample, we found that where the adviser was paid under an upfront commission model, the pass rate was 55% with a 45% fail rate. Where the adviser was paid under another commission structure, the pass rate was 93% with a 7% fail rate”.
In 2025, REP 824 had ASIC stating: “Files relating to the establishment of SMSFs has identified concerns that 62 files failed to demonstrate compliance with the best interests duty, with 27 files – over a quarter – raising significant concerns about client detriment relating to recommendations to set up an SMSF. Barely a third of advice files – 38 of 100 – demonstrated compliance with the longstanding obligation for advisers to act in clients’ best interests”.
However, as has been pointed out by advisers responding to Financial Newswire’s coverage of the ASIC report, the regulator has admitted that it “used risk indicators to select a sample of 100 SMSF establishment advice files for our review”.
“The sample was not selected with the intention of being random or representative of the financial advice sector,” it said.
In other words, it was a highly focused with the sample derived via risk indicators and therefore likely to throw up some worst-case examples.
In 2014, ASIC explained that in developing Report 413 it had undertaken roundtables of 12 insurers followed by “a targeted surveillance of advisers who give personal advice to consumers on life insurance products, which involved a review of 202 advice files (phase 2)—our surveillance targeted advisers who sell a large amount of life insurance products”.
REP 413 went further in specifying that “This was a targeted surveillance in so far as the sample of files selected for review was not a random sample of advice from randomly selected AFS licensees or authorised representatives. Rather, our objective was to identify the licensees and authorised representatives who were active in giving life insurance advice so as to test the quality of advice these licensees were giving”.
What is more, ASIC in 2014 admitted that it had asked the insurers to
“tell us the three licensees or authorised representatives who had:
(a) the highest number of new ‘in force’ policies written in the relevant period (2012 and 2013 financial years); and
(b) the highest number of policy lapses in the relevant period.”
It is history that at the time of the industry debate leading up to the introduction of the Life Insurance Framework it was generally acknowledged that some advisers were guilty of “churning” clients and that the insurers would have been well aware of who those advisers were.
Recent analysis from the Council of Australian Life Insurers (CALI) has revealed that there are now only 185 pure risk advisers now operating in the profession.