Speaking to SMSF Adviser, Licensing for Accountants chief executive Kath Bowler said there is no simple definition under the legislation of what a wholesale and retail client are in relation to superannuation.
“When you advise a superannuation client sometimes you’re advising them on their SMSF as their capacity as a member of the fund, and sometimes you’re advising them in their capacity as a trustee,” she said.
“In fact there are different retail and wholesale requirements depending on whether they’ve got their trustee hat on, or their member hat on and that gets really confusing.”
In a paper written in conjunction with law firm Holley Nethercote, Ms Bowler explained that clients can be treated as wholesale clients where, amongst other eligibility criteria, an accountant certifies that the client earns more than $250,000 per annum or has more than $2.5 million in net assets.
However, the rules change when superannuation is involved, she said.
“In most instances, such as super advice that covers contribution levels, life insurance cover or benefit payments, the client must be treated as a retail client,” she said.
“There’s almost no scope to treat a client as wholesale when you’re advising them in their capacity as a member, so basically when you’re talking to clients about contributing to superannuation, that would be in their capacity as a member and they must always be treated as retail.”
Some accountants have clients with $10-15 million in their super fund and who are running major corporations, she said, and are treated as wholesale in every other aspect.
“Yet, to put $20,000 into their super fund, they have to be treated as retail. So there just doesn’t seem to be any consistency,” she said.
“I just think it’s over the top in how the definition of wholesale has been applied to SMSFs. A lot of the accountants with high-net-worth clients are really struggling with it.”
Another instance of bureaucracy going crazy and what does it achieve except to confuse even the best of us in the industry so what hope in hell has poor old super member or Trustee got in understanding these ridiculous rules.
I think it is more concerning that share brokers are asking accountants to certify SMSFs (and or individuals) as wholesale, telling the clients they will get access to “special offers” if they are wholesale; without telling the client of the rights they are giving up by being treated as wholesale.
Just in the last couple of months we have been asked to sign: forms that were blank; forms that name two spouses and their SMSF even though only the SMSF was eligible; forms for entities we have no relationship with;[b] and forms that make the accountant accept liability for any losses a client may incur![/b]
We have our own version which is from the ASIC template, and will only do one person/entity per form. We specifically point out to the client that they are giving up rights they would otherwise have and send them a couple of articles discussing that issue; invariably the client was not aware of the implications.
And, it made Super17 a bigger nightmare than it already was as every client had to have a retail SoA just to get the advice to them. Reams of unnecessary disclosures that just serves to limit the prominence of the actual advice.
I saw very few SoAs that actually required product advice. They were all strategic advice papers talking to contribution, pension commutation, TBC, TSB and CGT Relief. Where are the ‘products’ for the purposes of the Corps Law? That’s right, super is a one size fits all….Another example of the ineffective carve out afforded SMSFs
Kym, it’s pretty simple, a SMSF is a product just the same as a retail or industry super fund are products.
A pension is a product and thus a commutation is product advice. And so is startin a pension product advice.
Contributions are advice about putting money into a super product.
Other products include death benefit nominations that loads of accountants have for years signed up with the deed but with zero AFSL advice.
And what about all those pensions started by accountants and whether it’s reversionary or not, again product advice.
So there is plenty of strategic product advice that doesn’t include an actual investment or insurance product 😀