SMSF industry experts have repeated warnings issued by the corporate regulator that there will be a clampdown on client-driven execution-only advice by unlicensed accountants establishing SMSFs for their clients.
Speaking at the SMSF Association’s recent “Accountants and SMSFs – what lies ahead?” roundtable, Verante Financial Planning financial planner and SMSF Association director Liam Shorte said accountants want to provide clients with advice on establishing and winding down SMSFs, along with contributions, tax returns and pensions.
But when accountants are dealing with SMSF advice, they can no longer just look at the SMSF, Shorte said.
Rather, they have to be abreast of existing products within the client’s current fund, research the existing products, look at the insurance arrangements underlying the product and determine what they could potentially lose if they transitioned to an SMSF, he said.
He noted the Australian Securities and Investments Commission (ASIC) will be scrutinising unlicensed accountants who advise clients on establishing SMSFs, particularly to purchase property.
“They’re out there [saying] it’s client directed, that the client wants an SMSF to buy a property, and you ask if they discussed the exit strategy. Are there any benefits coming across from an employer fund? Do they need insurance? Are they going to lose everything when the money comes across?” he said.
The accountant might argue the establishment was client driven, but if, for example, off-the-plan property prices decline significantly and the case reaches the courts, this defence will not hold accountants in good stead, he said.
His comments on ASIC’s clampdown follow a warning issued by ASIC acting senior executive leader Kate Metz, who said the corporate regulator will take a dim view if accountants say they did not do anything except provide execution-only services.
“It’s very unlikely that that’s really going to be execution-only advice,” Metz told a recent online livestream panel event held as part of the SMSF Association’s inaugural SMSF Week last week.
“That will be personal advice because if somebody has come in to see you, there is an expectation that they are coming to see you so that you can use your professional judgment and provide them with some personal advice.”
Licensing for Accountants chief executive Kath Bowler told the roundtable accountants cannot cover themselves, even if they issue statements of advice (SOA) for execution-only services, if they have not researched the client’s complete financial situation and deemed it suitable for them to establish an SMSF.
Bowler said she has spoken to accountants who have told her they have established SMSFs and issued SOAs only because they were client driven, despite them believing it was inappropriate for their clients.
“Either you think that and you have to document that in the SOA or you need to be really clear that you’re not giving them advice and don’t give them advice,” she said.