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Client role key for advice

Client capacity SMSF advice

Practitioners need to understand whether they are advising the SMSF trustee or SMSF member to be most effective.

When providing advice to an SMSF client, practitioners must know the capacity in which the individual being advised is acting in relation to the fund in order maximise the value of any recommendations made, a sector specialist has said.

“I do think it’s important, particularly with self-managed super fund advice, just to sit back for a moment and think about [who you are advising] a little bit more because it will actually guide you through to what are some of the different ways that you can actually look to approach your advice,” BT Financial Group head of financial literacy and advocacy Bryan Ashenden told delegates at the recent SMSF Association National Conference 2021.

“When you’re talking about self-managed super funds, the question is are you talking to the individual, who is the member of the self-managed super fund or the prospective member of the self-managed super fund, or are you talking to a person in their capacity as a trustee.

“[So] we need to remember that there are two different clients in a sense here that we talk to.”

Being able to make this conscious distinction can make the advice process simpler and improve a practitioner’s ability to scale the advice they are looking to give, Ashenden said.

According to Ashenden, identifying who the person receiving the advice is can be made easier by recognising the relevant surrounding circumstances. He used the situation of establishing an SMSF to illustrate this point.

“[Here the practitioner] has got to be [advising the member] because the SMSF doesn’t exist. So we actually can’t advise somebody in their capacity as a trustee if they aren’t yet the trustee of the self-managed super fund,” he noted.

However, he acknowledged every situation is not as simple as this and there are times when the advice can be provided to the individuals either as members or trustees. Such an instance might be when the practitioner is providing advice about the initial investment strategy, he said.

“[We can be providing advice to the member here because] is it not more the case of saying my recommendation to you is to set up an SMSF and when you have an SMSF established we need to invest your money, and here is my analysis of your risk profile and here is my recommendation about the portfolio of investments that you should hold in that fund,” he said.

“That actually makes sense.

“But those investment decisions ultimately would actually sit with them in their capacity as the trustee because it’s as the trustee, if you like, that you will actually be implementing those recommendations.

“So it clearly makes sense you could do it that way as well.”

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