SMSF advisers need to work in conjunction with accountants and fund administrators before implementing certain strategies for their clients to ensure successful execution in the post-super reform environment.
This challenge was presented by Colonial First State technical services executive manager Craig Day at the SMSF Association National Conference 2018 in Sydney last week.
“I very much live in technical advice and strategy land and talk to a lot of advisers about how they can implement the rules to get good outcomes for their clients,” Day told delegates.
“But as I’ve discovered over the years, especially in relation to the SMSF space, I can come up with some great strategies but then when you go to implement it, it creates all sorts of hell for the administrator.
“So one of the things I do on a regular basis, before I come up with any sort of strategy for an SMSF, is I begin to think about how this works from an administration perspective.”
He revealed over the years he had checked strategies with other technical experts who specialised in administering SMSFs.
“We’ve found sometimes the strategy ends up being so expensive and convoluted that it wipes out the benefit of the strategy,” he said.
“So you need to take a look at all the different strategies that you’ve heard about over the last few days [at the conference] and understand that yes, it is technically possible under the rules, but would you actually do it.
“Also, we’ve found it’s really important to engage with the accountant or the administration service to agree that yes, we’re going to do this, but how do we make each other aware of what we’re doing to make sure what we’re doing is possible, otherwise you tend to cut across relationships and create a lot of confusion for the client.”
He said even just rolling over a pension could potentially create a lot of “admin noise” due to the latest super caps and limitations now in place.
“Or having a separate segregated investment strategy can all of a sudden create a level of discomfort between me and my accountant within the financial services business that we’re running because [the strategy] causes a lot of issues,” he noted.
“The moral of the story is that with these very complex laws, you’ve got to start communicating and start working with the accountant and administrator, and make sure that what you want to happen is possible and that it makes sense.
“Understand where things can potentially go wrong, what the adviser wants to get out of this strategy and ensure as an adviser that you understand when and where you need to engage with the accountant or administrator to make sure everyone is on the same page to deliver the strategy and outcome for the client.”