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Accountants need to identify SOA situations

It is imperative for accountants looking to continue providing services to their SMSF clients under the new licensing regime to recognise the situations where a statement of advice (SOA) will be required, according to an industry expert.

“If you’re licensed and you recommend any product to a client, you’ll have to issue a statement of advice and accountants need to get used to this,” NowInfinity principal Grant Abbott told the 2015 selfmanagedsuper/NowInfinity SMSF Strategies Day in Melbourne on Friday.

With that in mind, Abbott said it was imperative accountants identified what was considered a financial product and what was not, so they would know when an SOA was required.

However, he warned that was not always a straightforward process.

“If I tell a trustee to set up an investment strategy, is that a financial product?” he said.

“So if I tell them we’re going to invest in equities, we’re going to invest in property, we’re going to invest in cash and this is our investment strategy, it’s obviously not a member-related issue and it’s not a financial product.

“But if I go down to the next level and I say the shares you should invest in are ones that will pay you really good franked dividends, like Telstra, I’m then giving the trustee of the fund, not the members, financial advice.”

He pointed out an SMSF itself was not considered a financial product, but instead was an umbrella of financial products, meaning once the new licensing rules came into play on 1 July 2016 many strategies associated with them would be considered financial products and would require an SOA.

“So if you’re advising a client on a contribution, that’s a financial product itself. If you’re advising a client to take a TRIS (transition-to-retirement income stream), it’s a financial product. A BDBN (binding death benefit nomination) – financial product. Take a lump sum – financial product,” he said.

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