Speaking in a recent panel hosted by the SMSF Association and ATO, ASIC technical adviser to the deputy chair Kate Metz said when advisers talk to clients about setting up an SMSF, they must critically assess why the client wants to set up an SMSF and determine whether it’s appropriate.
“If you are an adviser and somebody comes to you and says ‘I really want to set up an SMSF because I really want to invest in property. I have heard it is the way to go. I have spoken to my brother-in-law and he has done this’. As an adviser, it is not enough that you rely on what your client wants,” she cautioned.
“You need to critically assess whether it is appropriate for them. Both the SMSF and the property investment.”
Ms Metz said ASIC expects advisers to “critically judge and tease out the reasons why someone is interested in setting up an SMSF” and make sure it is in the client’s best interests.
While there are execution-only services, she said, it all depends on how that conversation goes.
“If you are an adviser and you say ‘Yes, you can go here and you can set it up, or I can set it up for you as execution-only advice.’ It is very unlikely that is execution-only advice, that will be personal advice, because if someone has come in to see you, there is an expectation that you will use your professional judgement and provide them with professional advice,” she said.
“I think we would take a very dim view of you simply trying to palm it off and saying that it is execution only.”
Since the removal of the accountants’ exemption, execution-only services have been used by some accountants, including those that operate under an AFSL, as a way of avoiding costly statements of advice for their clients.
DBA Lawyers special counsel Bryce Figot previously warned SMSF professionals that while simply providing factual information or execution-only services may work for simpler aspects of superannuation, it can become risky where it’s used for complex advice needs.
“I’ve spoken to a significant number of accountants who are licensed and aren’t very keen on doing statements of advice because they feel their client won’t value the extra value that the statements of advice give them,” Mr Figot said previously.
Jaime Lumsden Kelly from The Fold Legal has also previously cautioned accountants against establishing SMSFs on an execution-only basis without advising clients on the suitability of an SMSF.
“ASIC is likely to scrutinise this activity closely to find accountants who are still recommending SMSFs ‘off the books’ or ‘by implication’,” she warned.
What a communist society we have become. It appears ASIC is really working for the big banks and big investment firms. How dare a client assess what they want. how dare clients leave the big banks and industry finds. Glad to see ASIC there to make sure the banks and investment houses can continue to rip off the public without the trusted accountant able to assist. Glad to see ASIC continues to be the gate keepers for the rip of merchants and con artists.
So ASIC say that if an individual rings me up as an accountant and wants to set up a SMSF, I cannot do it as execution only. Even though that is what they want to do.
Okay, now for consistency of approach by ASIC
If that same individual rings up an industry of public offer superannuation fund and wants to set up a superannuation account with them. It is okay for the fund to do that over the phone or they will send out documents for the individual to complete, as an execution only setup.
Why isn’t the industry or public offer fund required to prepare a SOA for that client on the same basis as I am required to do when they ask me to set up a SMSF.
Why do the industry and public offer funds not have to do a SOA and advise them that there are many other potential superannuation funds out there that they could use and it could be in there best interests to set up a fund with another provider? Purely based on published returns and fees.
Now what is the difference?
Apart from ASIC thinking they are different.
They are both supposedly the same, a superannuation product to be dealt with and advised on as such.
Therefore they both require SOA’s to be completed for each case – the individual who wants to set up an industry or public offer fund, or the individual who wants to set up a SMSF.
Therefore ASIC should be acting consistently in its approach to all superannuation providers who are approached to set up funds by individuals.
We can only wish.
There is no consistency but yes you need to do more than execution only. I used to think accountants weren’t dumb until I read the comments relating to this change. It’s simple follow the law or don’t assist them.
Next we will need hardhats to go to the toilet
Isn’t that why politicians are mostly seen wearing hard hats, because they’re spinning s….t?
The SMSF documentation on its own is not a Financial Services product therefore the set up does not require an SoA, it’s the advice regarding suitability and associated services (bank acct, rollovers, insurances, other investments etc) that is where the issue lies. Anyone can go onto Cleardocs and buy the documentation because that’s all it is…documentation.
So now we have to protect clients from themselves – good luck with that
ASIC desperate for runs on the board after a lfetime innings that has achieved nothing.
So a person walks into a bar & meets an accountant, financial planner & SMSF administrator.
Glad to see you here, I want to setup an SMSF.
The accountant says well I can tell you about an SMSF but I cant set one up. I dont have a FP licence & ASIC says I cant talk to you.
The financial planner says I can help you but I am going to have to setup a meeting, prepare an SoA (at costs of $X,XXX)& but if an SMSDF is not suitable then I cant help you.
Ah, the administrator pipes up & says I have a website. You can go there & fill out all of the forms.
The persons asks how can you do that. The planner inquires – but you have a licence? Yes says the administrator but thats so I can clip the ticket on bank accounts term deposits & share trades only. I dont provide advice.
THe whole advice / licencing model around SMSFs is a joke. It is not a level playing field & instead of taking a dim view of execution only ASIC should take action & ensure that all participants in the market are treated fairly & most importantly that client interests are protected.
Cheers Bruce. An amusing read, but sadly all true!
Nicely expressed Bruce. Recently I saw a firm discounting this type of work in the pursuit of quick year end revenue/sales. Surely that’s enticing people to set up an SMSF with zero understanding of their ability to run one. Guess someone was given a “project” but setting up an SMSF is a little different to buying a $10 deck chair at the checkout of the local hardware store.
“it all depends on how that conversation goes?” That is about as good as saying “how long is a piece of string” in relation to: when and when not to give advice. If ASIC provide such vague guidance, then there is little wonder that the financial advisory sector has so many issues. Clarity is the key. Provide a mandatory form, with specific guidance that all should use, including SMSFS trustees as a base. The checklist to tick and flick, so that the appropriate issues are brought to the users attention and hopefully considered. For advisors this base document would progress to an SOA, but again, ASIC should provide the template. Make the advise document consistent and comparable and concise. It will be easier for ASIC to review, the user may obtain a second opinion and have NO issues comparing the two documents and maybe fees may reduce if the template is provided?
ASIC is bonkers and doesn’t understand the legislation they are supposed to police. If an accountant advises on the suitability of an SMSF for a particular client he is giving advice on a financial product, hence needs to be licensed. However an accountant does NOT need to be licensed for execution only. You can’t combine the two and execution only is just that: execution only without advice.
So ASIC would prefer us to rip the client off by charging for a SoA that recommends exactly what the client wants in the first place. Target the spruikers not professionals trying to do the right thing by their clients.
By the way her comments are worded, it seems that not even ASIC understand the word “advice”. SELF MANAGED clients simply don’t want to pay for ‘advice’ in the way ASIC require it to be delivered.
ASIC need to realise that different types of client require different levels of support making decisions. The model of “let’s assume you’re an idiot and I’ll take all the responsibility” is not for SMSFs. Some clients just want facts and ideas to consider, knowing the responsibility still rests with them. Most would like to be warned if they were about to do something stupid, but again it’s just a warning not a formal recommendation and SOA.
If I do an education course, the lecturer certainly doesn’t need to issue me with an SOA at the end of each lesson.
This is the crux of the whole problem. Well put.
Most self managed clients just want facts and ideas to consider, knowing the responsibility still rests with them, and perhaps a warning they were about to do something stupid.
Unfortunately that all requires an SOA now – at a cost of $x,xxx
Maybe I should call the head of ASIC on his mobile and have a private chat about the situation. When are these people going to realise that people make their own decisions. Ok if its property spruikers, go after them, its not the accountants who are the issue, rather the spruikers….how many of those have been prosecuted? thats right, only Park Trent who continue to do whatg they used to do.
Yeah, and I don’t need a driving license either.
Those traffic police should go after the bad guys.
It is quite obvious what is going on here, the big 4 are losing market share to SMSF’s, solution? Lean on ASIC to make it unappealing to set up and operate an SMSF.
it is not the big 4 at all, Dora! ASIC & the RC have been crucifying them with more to come. Pretty evident it is the one area that ASIC refuse to investigate and that inept Haynes refused to question properly; the Industry Super funds. They are the one single area that will gain most due to SMSF’s and retail super or SMSF accountants and planners being smashed like this.
Music to my ears. Now just expand the thought to the “industry” – smsf administrators, smsf technical guru’s, accountants, advisers, brokers, real estate agents and bankers and we are getting close to making this a level playing field where those who are “in” will quickly adapt and those who have been operating under loopholes will finally need to make a decision and spend the next 5 years getting the appropriate quals as they should have done 3 years ago when the exemption was removed. One in all in!
If ASIC want to be Big Brother then they should take the responsibility. Let there be one common trust deed for all SMSF’s and considering the SIS and ATO this should be the norm.Also let ASIC issue online a guideline/ checklist for people who want to establish an SMSF and if they have considered all the possibilities in this guideline/checklist and ticked off on them then let them proceed.
Can Qualified Accountant can form his own SMSF without getting SOA ??
Yes based upon financial planning interpretations but you can’t include anyone else. I don’t need to give myself an SOA but I need to give my wife one.
Thanks Scott for your reply.
yet to see anything happen – even after calling ASIC, when the accountant , with NO license setup an SMSF leaving the client about $11k worse off
With settlements on some off the plan units inside and outside of SMSFs looking under pressure to secure finance that “client directed” excuse may be tested especially if any commissions received on the sale or financing.
so all clients are imbeciles and cant be trusted to know their minds or be capable of making decisions regarding the wealth that some have miraculously accumulated by sheer luck.u.
If I enter a McDonald’s or Hungry Jacks, I don’t get a statement of advice outlining the risks to my future health and the possible related impact on my future finances by consuming their products. While I agree there must be systems in place to ensure the consumer is not ‘ripped off’ by the unscrupulous, there must also be a level of reality in life, or we will end up with every purchase of every product requiring some form of statement of advice.
Yet I can go online and open a CommSec share trading account with no questions asked?? Or take out a $1,000,000 home loan no advice required?? Get real ASIC.
Isn’t it just beautiful. ASIC now expects unlicensed accountants to give advice rather than act on client’s instructions. We can’t win either way. Break the law giving advice or break the law not giving advice. Bureaucrats just seem to hide away in their nooks developing impossible rules and situations for small players. ASIC gets caught short on regulating banks and the big insurance/financial service providers but happy to heavy hand accountants.
It’s called being directionless as we all know they seem to be at this time…
As usual ASIC are flailing around like a dying whale. Desperately trying to stay alive and relevant while in effect injuring everyone around them – consumers, advisors and accountants – the good and the bad. The current compliance requirements for a Statement of Advice make the document almost unreadable. How is unreadable advice that costs more, any more in the clients best interest than execution only advice. The regulators need to focus more on compensation and incentives and less on things that only make good financial advice more expensive and less available to the average Australian.