A lack of definitive instruction and poor trustee attitudes regarding the SMSF investment strategy are creating confusion and anxiety among practitioners.
The obligation to formulate and formalise is one aspect of the requirement to have an investment strategy that is still relatively unclear. The majority of practitioners agree formalising the investment strategy in writing is best practice, but there is no direction as to who should be performing this task.
“Who can write it for the trustees because accountants won’t write them? That’s not their fault because they’re not allowed to do it without considering all of the overall financial position of the client,” Advisers Digest founder Peter Johnson told attendees at the recent SMSF Auditors Association of Australia Conference held in Melbourne.
“Plus if they get something wrong they get sued. Or if it’s a financial adviser that does it, they get sued.”
During the same session, a conference delegate suggested action is required by industry bodies to encourage the ATO to find solutions for these issues.
“I think it would be good for [the SMSF Auditors Association of Australia and others like it] to go to the powers that be to say we’re auditing something that the trustees are putting no effort into,” the practitioner said.
“Also, when you pull the wording [of the investment strategy obligations] apart they’re really onerous and we don’t really see the point.”
According to Johnson, the risk practitioners expose themselves to with regard to the investment strategy highlights a larger problem the SMSF advisory community is currently facing.
“[You can get sued even if the client says:] ‘I wanted to lend money to my mate, the mate borrowed the money, but you didn’t [prepare] a good enough SOA (statement of advice), you didn’t warn me I wasn’t going to get my money back, even though I still would have lent it to him, so it’s still your fault’,” he pointed out.
“It’s just lunacy.”
