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Execution-only requires full disclosure

Accountants opting not to get licensed to provide limited or full financial advice will still be able to act on many execution-only services, but must use caution and disclaim their scope up front, a specialist SMSF lawyer has warned.

“I would suggest that as a practitioner you may want to curb your arrangements,” DBA Lawyers director Dan Butler told the DBA Network SMSF Strategy Seminar in Sydney last week.

“You need to say that ‘as an accountant, I can give you tax advice or traditional accounting services, but unfortunately, I’m not licensed to give financial planning advice, you must go to someone that has an Australian financial services licence, here’s my disclaimer’ and then be very careful as to how you articulate your advice.

“This is a real trap.

“And from your clients’ perspective that might sound like a rude awakening, but if you want to accept liability and get done without a licence, tell them what you’d do in that case – set up the fund and invest into this.”

Butler said accountants also had to draw the line between broad asset allocation information and investment advice.

“You can give broad asset allocation advice, where you can say it’s best to have diversification and [explain] what people do to diversify – you can have some money in shares, property, bonds et cetera, but you can’t give financial advice on that,” he said.

“This is where you as a practitioner have to set your limits and the difficulty as well is that in some practices you can trust yourself, but you can’t trust your staff.

“You’ve got to have practices that are well within the realm so your staff is not going to be a loose cannon.”

During the seminar, an accountant highlighted that during meetings clients generally could not distinguish between tax advice, business advice and super advice.

“ASIC will be auditing those who are doing lots of execution-only [SMSF establishments] to see whether there was any influence or any recommendation because if there was without a licence, that could be dangerous,” Butler said.

“We’ve seen a few scalps every now and then from people operating without a licence.”

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