The Australian Financial Complaints Authority (AFCA) has published a video featuring Shail Singh, lead ombudsman for investments and advice, explaining how complaints and compensation apply to self-managed superannuation funds (SMSFs). Compensation for losses from inappropriate investment advice is paid to the fund rather than directly to its members. The update may apply to consumers affected by the collapse of Australian Fiduciaries Ltd and a small group affected by Shield and First Guardian. Complaints can cover both advice to individuals to establish an SMSF and transfer existing superannuation into it, and investment advice to the fund’s trustees. Separate complaints about these issues are typically consolidated, and complainants should seek consent from all trustees and directors before lodging. Compensation for inappropriate establishment advice usually covers setup costs, including advice and professional fees, rather than investment losses. For inappropriate investment advice, compensation typically covers resulting losses, calculated using members’ previous investments to assess the position the fund would have been in with appropriate advice. Where an AFCA determination awards compensation and the financial firm is insolvent, eligible consumers can apply to the separate Compensation Scheme of Last Resort (CSLR). An SMSF is eligible for one determination and is therefore likely eligible for one CSLR payment of up to AUD 150,000, regardless of its trustee structure. Payment goes to the fund, which can distribute it under its governance arrangements. Consumers considering winding up an SMSF should seek independent professional advice, particularly where the fund still holds illiquid investments.
Australian Financial Complaints Authority explains compensation treatment for self-managed superannuation fund complaints
The Australian Financial Complaints Authority has published a video explaining that compensation for inappropriate SMSF establishment advice usually covers setup costs, while compensation for investment losses goes to the fund rather than directly to members. Where a compensation determination remains unpaid because the financial firm is insolvent, an eligible SMSF is likely entitled to one Compensation Scheme of Last Resort payment of up to AUD 150,000. Consumers considering winding up their fund should seek independent professional advice, particularly if it holds illiquid investments.