Speaking at the National SMSF Conference 2017 last week, The Fold Legal solicitor director Jaime Lumsden Kelly said ASIC would “come knocking” if the regulator became aware of an unlicensed accountant establishing SMSFs without any further discussion with the client.
While the establishment exemption is legitimate, Ms Lumsden Kelly said the onus was on accountants to hold a comprehensive conversation with their clients before executing the service to avoid potential pitfalls.
“Although you are not required to do so, you probably should alert them to the fact that they should perhaps consider getting advice,” Ms Lumsden Kelly said.
“The danger in not having that conversation is if something goes wrong, the client will tend to automatically come back and say, ‘Hey, you are my trusted adviser, why didn’t you tell me that I shouldn’t do this?’
“Obviously the double edged sword with not being licensed is that you can’t advise a client to have an SMSF, and you also can’t advise them not to have an SMSF because that’s also financial product advice but because of the trusted adviser status, I do think there should be a conversation there.”
Instead, Ms Lumsden Kelly believes unlicensed accountants would be better off using the referral exemption in conjunction with the establishment exemption to ensure that clients are fully aware of the opportunity to obtain advice.
Although accountants may be reluctant to hand off clients, Ms Lumsden Kelly says a collaborative referral relationship would be a safer approach in choosing to remain unlicensed.
“I think it’s dangerous to do the no advice exemption on its own, because if ASIC was to come knocking and they said to you, ‘We have serious concerns that your clients haven’t been getting advice’, and even though you’ve suggested that they should get advice, they don’t know where to go to get that advice,” she added.
“I understand too that ASIC might ask questions and it doesn’t mean anything might come of it.
“You might be able to satisfactorily answer those questions but there can be a lot of time and money invested in actually answering those questions to ASIC’s satisfaction so I would always say it is much better to set things up in advance so that it works well and never have to deal with those questions in the first place.”
“SMSF establishment exemption” – what??
99% of SMSF are funded by rollovers out of non-SMSFs. There is no exemption whatsoever for rolling money OUT OF a non-SMSF. It’s a blatant crime – whether or not the accountant gave any advice.
There has always been a SMSF establishment exemption, perhaps you need to “read the rules” a bit better.
And when did it become a crime for someone to transfer money between funds? So long as an accountant did not advise them to do so there isn’t an issue.
Methinks you doth protest too much.
Accountants who are reluctant to hand off clients should consider using scaled advice providers.
Scaled advice is limited in scope – to just cover the transaction being considered. So long as the advice provider has a robust scoping process (online tools for example) then scaled advice is great for your more confident clients who just want the minimum amount of advice but acknowledge that since 2016 there are new compliance hoops to jump through. The scoping tools demonstrate to ASIC that the client had choices and was able to direct the scope of advice they need. If anyone ever claims you overstep the line you just pull out the audit trail of the client’s decisions.
This approach is more akin to a GP making a referral to a specialist for a medical test or procedure. Scaled advice is just ‘one-off’ advice. It’s a quick, light supplement to the client-accountant relationship and doesn’t threaten anyone.