Speaking to SMSF Adviser, Jaime Lumsden Kelly, solicitor at The Fold, pointed to one challenging aspect of the limited licence when it comes to recommending a client set up an SMSF.
“Let’s say [a client] holds a super fund with Australian Super and they come to the accountant and they want to talk about an SMSF. The only advice that the accountant can give them on the existing super fund is to look at that fund in relation to an SMSF, for the purposes of whether they will or will not recommend a SMSF,” Ms Lumsden Kelly said.
“So basically, working out whether a SMSF will be better or worse than the existing fund with Australian Super, in this example.
“However, they [can’t] give advice on shutting the old fund down. So if we assume that in this example the accountant looks at the Australian Super fund and says, ‘yes… an SMSF is likely to be appropriate and will probably offer you a better return than your existing Australian Super fund’, then they can talk to them about rolling the money over… but they can’t then say to the client ‘can you close that Australian Super fund down?’”
Ms Lumsden Kelly added that accountants should be wary in circumstances such as these where there is an insurance policy attached to an existing superannuation fund.
“The accountant can’t advise on that insurance because they have no full advice authorisation in relation to insurance; all they have is a class of product authorisation, so they can only talk about life insurance in general terms and can’t advise on specific products,” she said.
“So what in practice is going to have to happen – and this is going to be a little bit awkward for the accountants – is that when they set up an SMSF and recommend a rollover, before they roll that money over they’re going to have to send the client to a financial planner who can look at the life insurance that sits in that [fund],” she said.
Ms Lumsden Kelly also noted that while setting up a bank account is a crucial part of establishing an SMSF, an accountant cannot do that on behalf of their client under the limited licence.
“They can’t do that because that’s actually considered to be dealing in a financial product – it’s a bank account – so it’s a deposit product,” she said.