Adherence to the best interest requirement under the Future of Financial Advice (FOFA) reforms was still causing confusion in the SMSF sector due to the different types of professionals and practitioners providing advice in the area, a recent selfmanagedsuper roundtable found.
“I’ve heard the term best interest bandied around about SMSF advice, but what does it really mean from a Corporations Act point of view?” SMSF Strategies principal Grant Abbott said.
Oliver Rockwell managing principal Peter Bobbin said the answer was not clear cut when looking at the area of financial services.
“Anybody that’s a professional understands what best interest means. And if you actually have a look at the various standards, the know-your-client rule as it applies in the Corporations Act, best interest as it now is, really they’re attempted codifications of what professionals have always been doing,” Bobbin said.
“Now frustratingly, as far as the Corporations Act and financial services is concerned, nobody knows what best interest means. All there is in the Corporations Act is just a range of harbours where if you tick these boxes you are deemed to have satisfied the client’s best interest.
“So what is best interest from a corporations law sense? I can’t accurately define it. What is it as a professional? I believe I do that every day.”
According to Abbott, the definition became further complicated when looking at the financial advice currently being provided by industry superannuation funds.
“The hard thing now is, with the industry funds, all the advisers there don’t have any qualifications to be giving advice on self-managed. So, when they’re advising these guys, whether it’s a transition or whatever, how is it possible to ever be in the best interest if you haven’t got the qualification to actually say ‘well, this might be an opportune time to set up an SMSF?’” he said.
Bobbin said he believed that grey area was what had led industry and retail funds to establish services for their clients that were akin to an SMSF, such as the capacity to invest in direct shares.
Abbott, though, said he felt that was an inadequate solution.
“It’s like that VW Golf ad on television where they say it looks like a Golf and sounds like a Golf, but it’s not really a Golf,” he said.
