ASIC, Financial Planning

SMSF advice process key to better client outcomes

SMSF advice process

Risks, alternatives and detailed record-keeping are critical for advisers discussing the potential establishment of an SMSF with clients.

Advisers must consider the potential risks of SMSFs, alternatives to such a fund structure and correct record-keeping as essential to their process when providing advice to clients who are considering establishing an SMSF, a technical expert has said.

In a blog post on the SuperConcepts website, technical services and education general manager Peter Burgess pointed to the Australian Securities and Investments Commission’s (ASIC) Report 575, which revealed over 90 per cent of the 250 client files reviewed contained substandard advice on setting up an SMSF.

Burgess cited the report’s guidelines for advisers to help improve the quality of their advice and highlighted three tips as still being critical for advisers a year after the report’s release.

Disclosing the risks of an SMSF structure, assessing the alternatives to such a structure and record-keeping were vital to giving the best quality advice, he said.

He highlighted the risks outlined in ASIC information sheet INFO 205, published in 2015, as being important for advisers to cover with clients when disclosing the potential risks of an SMSF structure.

“While these are the risks that should always be canvassed with clients, there may be other specific risks particular to the client’s circumstances that should also be discussed and disclosed,” he added.

When assessing the alternatives to an SMSF, he said advisers should be able to clearly answer the questions “why not an APRA (Australian Prudential Regulation Authority)-regulated fund and why an SMSF?” as part of their advice process.

He also outlined the importance of keeping accurate client file notes for the duration of the advice process.

“This is particularly important when providing a recommendation to establish an SMSF as the adviser needs to be able to demonstrate that they have informed the client of the risks and obligations of being an SMSF trustee, have evaluated the alternatives and that they have assessed the client to be suitable to be an SMSF trustee,” he noted.

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