Compliance, financial advice, Regulation, SMSF

Use tech services with caution

Financial advice technical services

SMSF advisers should use technical support services in moderation when offering advice on complex or technical matters outside their expertise.

SMSF advisers should exercise caution when consulting technical services while providing financial advice, particularly in situations where they lack the necessary expertise to dispense that advice, according to the SMSF Association.

Speaking at the industry body’s Technical Summit 2023 on the Gold Coast recently, association head of membership and corporate development Neil Sparks noted there were two options available to advisers when seeking to provide ethical financial advice in such cases.

“As long as the provider is competent for the purposes of the Corporations Act and the Australian financial services licensee has said you’re competent to give advice on SMSFs, we’ll give [the provision of financial advice] a tick there, but in the situation where it gets particularly technical or complex, we’ve got two options,” Sparks said.

“One is, ‘this is out of my league’ and refer it [to another adviser], and the other one is you can get some [technical] support, but it really comes back to the question of your competence and comfort with that.”

He used a case study to highlight the ethical implications surrounding an adviser’s ability to fulfil their competency obligations as outlined in Australian Securities and Investments Commission Regulatory Guide 175 when advising a high net worth client with the support of technical services.

The client wanted to establish an SMSF with a limited recourse borrowing arrangement (LRBA) using funds from a family trust to purchase an off-the-plan apartment on the Gold Coast that also had a separately titled car park, he said.

“You’re competent with SMSFs and LRBAs, but there are aspects of the case study that are outside your knowledge and experience? Is it appropriate to proceed to engage the client with the support of a technical services team?” he said.

“What if the only element you didn’t understand was the fact around the question of the separate title for the car park?

“Can you use tech services in this situation to supplement your knowledge, not stand in place of your knowledge?”

He added that where advisers consult technical services for assistance, they should be cautious not to overly rely on them when dealing with cases that seem to have similar details.

“One of the things that we have looked at is the fact that you can use technical services to supplement your knowledge,” he said.

“[However] the biggest risk of using technical services is that if you rely on it again [in relation to a similar but separate case] because you think it’s the same case study and it’s not.

“There’s different inputs and you will get a different output and suddenly the advice you’re relying on could be deficient, so you’ve got to use tech services in moderation.”

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