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Compliance

Adviser knowledge of SAFs poor

A lack of awareness and knowledge about small Australian Prudential Regulation Authority funds (SAF) has been identified as the area that will result in many planners and dealer groups attracting the ire of the Australian Securities and Investments Commission and the ATO.

According to JWW Consulting founder John Wiseman, in some of the worst-case SMSF advice scenarios, there were planners who did not even know about SAFs, adding that all dealer groups would be well advised to review their training in this area and address any deficiencies immediately.

“When providing financial advice, many planners often overlook SAFs as a superannuation solution as they regard SAFs as a more expensive – although this may well not be the case in the new environment – and a less flexible alternative to an SMSF even though they offer many benefits not found in SMSFs,” Wiseman noted.

“For those considering getting out of their SMSF but who feel they can’t because of taxation and other implications associated with moving out of funds, a SAF may in fact be the ideal solution.

“If any client or prospective client seeks to get out of their SMSF or are dealing with any of those issues, I am sure they would want information regarding SAFs as an alternative strategy included in the statement of advice.

“I am sure the auditor would be interested if it is not.”

It was important for trustees to always seek professional financial advice as SAFs might or might not be appropriate depending on individual circumstances, he noted.

He said he also believed there would be a surge of SMSFs opting out of current arrangements in favour of retail, corporate or industry funds ahead of the end of the financial year.

Many SMSF advisers were already being inundated by trustees seeking professional advice on whether they should close their SMSF and consider other options, he said.

Furthermore, he said he was concerned many SMSF trustees would make hurried, impulsive decisions that would adversely impact on their retirement aspirations.

While that was an opportunity for SMSF experts to step in, many advisers would miss out on business growth prospects, he added.

“Unfortunately, instead of structuring their practices in readiness for this inflow of new business enquiries and opportunities, a great number of planners are quite literally sitting on their hands and will miss out,” he said.

“There are two further concerns: the cost of providing advice is going to literally go through the roof and planners need to start charging realistic fee-for-service that reflects the level of service and accountability for advice provided.

“[Further], of most alarm are those planners who are not providing clients a comprehensive strategy to current arrangements.”

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