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Extreme caution needed on implied advice

Execution-only SMSF establishment was dangerous territory for accountants choosing not to be licensed for SMSF advice, as clients could assume the set-up was a recommendation, according to an industry executive.

“Technically you can still set up an SMSF after 1 July [2016] without needing to be licensed, however, I don’t recommend to any accountant that you do it unless you have given the advice in your capacity as a licensed adviser or somebody else you have as a referral partner does it,” Licensing Accountings founder and chief executive Kath Bowler told the 2015 CPA Australia SMSF Conference in Sydney last month.

“Because it’s not necessarily the words that come out of your mouth, it’s how that conversation is interpreted by the client.

“You might have said, ‘yes, I’ll set up an SMSF for you and this is how it can be done’, the client might go home and say to their partner that you told me to go and set up an SMSF today.”

Bowler said while accountants might not have recommended the fund, most clients would assume the SMSF would not be set up if it was not a good idea.

“[Clients would assume this] because you are their trusted adviser,” she said.

“So there’s an implied advice, even if the words aren’t spoken.

“That’s why I think you’re in dangerous territory if you set one up [without advice behind it].”

During the panel discussion on accountants licensing, CPA Australia senior policy adviser Michael Davison said the scenario was problematic under the current exemption.
“If a client walked in and said they want you to set up an SMSF and you don’t think it’s a good idea, you can’t say no and you can’t recommend against it, but you probably would,” Davison said.

But accountants would therefore be in breach if they recommended against setting up the fund as that would be taken as advice, he said.

CPA Australia financial planning policy adviser Keddie Waller said: “If you don’t want to give the advice, but you want to be able to work on the other side of the establishment, set up a referral arrangement with a licensed adviser so your client can go to somewhere to get advice.

“If they get advice, document it in their client files.

“Documentation is going to be the most important thing for you because if we come and do a QR [quality review] or if ASIC comes in and looks at your files, your documentation is going to be your evidence to prove you’ve been doing the right thing and have been staying on the right side of the line.”

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