Speaking in a recent BT webinar, Kit Legal founder and head of legal Catherine Evans said that when providing SMSF advice, identifying who the client is may seem like a straightforward process for advisers.
“[However], in more complex family groups where there’s multiple structures involved and where there might be children that are members of fund, advisers really need to think through who they are actually advising and whether they understand their goals and objectives,” she explained.
Ms Evans pointed out that the interests of different members may not always be aligned.
“You also need to consider once the fund is set up whether you’re giving advice to the members or the trustee.”
“It’s important to be really clear in your documentation [such as] the engagement letter and future correspondence about the different hats that the client is wearing and what your role is and who it is you’re advising.”
Ms Evans said that one of the common questions she receives from advisers is whether they can use the same statement of advice to cover many different entities.
“While legally you can, practically you need to think about whether that will be clear and concise for the client and whether they will understand what recommendations apply to them.”
“This is particularly [the case] where you might be giving recommendations to say a husband on his own, a wife on her own and then jointly, an SMSF. You need to think through what the best way is to communicate complex issues.”
BT head of public policy and technical services Neil Sparks said this may mean that there are situations where advisers need to distribute multiple statements of advice for advice involving the same fund.
“In a fund establishment situation, there would be advice to the trustees and then there would be advice to the members to join the fund and roll in benefits, make contributions and those sorts of things,” Mr Sparks explained.
“It’s pretty hard to get all of that in one document where you’re referring to [the client] as trustee, and then as a member, and then the spouse’s trustee and the spouse’s member.”
Ms Evans said it will come down to the individual adviser to work out the most effective way to communicate all of the necessary information to the client.
