Accountants who have provided SMSF advice in the past have been strongly encouraged to make contact with their professional indemnity (PI) insurer to ascertain how they are covered for advice given before the new licensing regime started on 1 July.
Irrespective of ASIC’s recent alert about the provision of advice outside an Australian financial services licence framework over the past three years, lawyers and PI providers were unlikely to be lenient where clients suffered considerable financial loss, JWW Consulting founder John Wiseman said.
“Many accountant clients that undertook SMSFs in the past as low-cost savings, investment and retirement vehicles will find themselves with no option but to restructure their SMSF or revert to an industry, retail or corporate fund at potentially significant cost,” Wiseman said.
“If the costs and impact associated are substantial, many clients will question the previous advice or lack of communication and poor pre-1 July service, and seek redress through legal action, hence the need to contact PI providers sooner than later.”
He said one example of a situation that could motivate a client to seek compensation could be the need to move from an individual trustee to a corporate trustee.
Another example was not providing small Australian Prudential Regulation Authority funds as a consideration in the belief they were more expensive and less flexible alternatives, he noted.
Accountants could expect to receive many requests from irate clients about the new increased costs to administer their SMSF or why a corporate trust deed was not recommended in the first instance, he warned.
“[The reason] ‘because it was cheaper at the time’ will struggle to stand up to scrutiny today,” he said.
