SMSF firms warned on litigation risks with elder abuse
SMSF firms without policies and procedures for dealing with potential elder abuse are exposing their firm to litigation risk, warns an industry lawyer.
Speaking at the SMSF Association National Conference last week, Partners Legal special counsel Caroline Harley stressed that elder abuse needs to be on the radar of SMSF firms as it poses a “huge risk” to their business.
“Financial service providers are expected to take particular steps where red flags and warning signs have been detected,” she warned.
While not all SMSF practitioners are governed by the Financial Ombudsmen Service (FOS), she said, FOS has some clear guidance which sets out what is good practice and what is expected from professionals in the industry in relation to dealing with elder abuse.
Ms Harley said there are a number of warning signs of elder abuse which could include a new friend attending an appointment, unusual transactions, uncharacteristic behaviour by the client, or an uneasy or uncomfortable feeling.
If a practitioner feels uneasy about a situation, she said, then they may want to have a discussion with the client privately and gather some information.
“Ask open-ended questions to gather your information. You’re trying to figure out why you feel uneasy and whether or not there is something in your internal processes and procedures that you should be following to make sure that your professional indemnity insurer will pay up,” she said.
Practitioners, she said, should also ascertain whether a substitute decision maker has been appointed or whether or not there was somebody else that had already been appointed.
“FOS [also] wants contemporaneous file notes. Why is it that you felt uneasy or what prompted you to feel uneasy? Setting out the concerns and the steps that you're going to take following that meeting, rather than just putting it on file and thinking yeah that was a bit weird,” she explained.
“It’s not enough to have those policies and procedures prepared unfortunately. You have to also document the way in which they're used and how you're going to comply with those, or what steps you've taken with that particular client file.”
When developing procedures and policies, SMSF firms need to consider the way their business operates.
“If you're predominantly online or use a high amount of email communication, then how are you verifying or validating that the client has capacity, or is the one providing instructions? Sometimes telephone calls are not enough, you don't know who's sitting in the room with them, exerting influence,” she cautioned.
“You might ask them to come in, or whatever it is that you think will mitigate that risk.”
“We're in a very litigious society now and people are looking for who they can sue. Unfortunately your professional indemnity insurer looks like a pretty good target to a lot of people. So maintain your record keeping so that document based risks are minimised. [That includes] file notes, emails, and confirming things in writing wherever you can.”