By Paulina Duran
SYDNEY (Reuters) - Australia's corporate watchdog said on Thursday it will pursue enforcement action against financial planners who advise self-funded pension funds but have broken the law, saying a study found 90 percent of such planners were guilty of it.
A day after suing a unit of No. 1 wealth manager AMP Ltd (AX:AMP) over alleged unlawful behavior by its representatives, the Australian Securities and Investment Commission (ASIC) warned it would pursue many others across the industry.
"Around 90 percent of financial advice on setting up a self-managed super fund (SMSF) did not comply with relevant laws," ASIC said in a statement on Thursday.
There are about 25,000 financial advisers servicing Australia's A$4.3 trillion ($3.15 trillion) retirement savings pool. Those advising self-managed retirement funds capture a fifth of their revenues, totaling about A$900 million, according to government figures.
The regulator said a study of hundreds of cases had found the unlawful advice ranged from poor record keeping to actions likely to result in significant customer losses.
One out of ten clients was likely to be significantly worse off because of the advice, while a fifth were at high risk of losses because of a lack of diversification in investments.
ASIC warned it would share intelligence with the Australian Taxation Office to target unscrupulous behavior.
"It is clear lots of people are setting up self-managed super funds without knowing whether this is the best option," ASIC Deputy Chair Peter Kell said in the statement.
ASIC, which has been criticized for not using its full punitive powers to tackle misconduct by financial advisers and their employers, will take enforcement action and ensure advisers and their employers compensate clients for losses, the regulator said.
A bruising inquiry into finance sector misconduct has revealed AMP, the company with the largest financial planner network, charged thousands of customers for financial advice it never gave. Under questioning, National Australia Bank (AX:NAB) admitted to similar behavior affecting hundreds of thousands of clients.