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ASIC issues warning on ‘execution-only services’ for SMSF setups

ASIC issues warning on ‘execution-only services’ for SMSF setups

ASIC
Miranda Brownlee
22 November 2018 — 1 minute read

ASIC has warned SMSF professionals that it will be taking a “dim view” of professionals who set up SMSFs on instruction from their clients without critically assessing whether it is appropriate.

Speaking in a recent panel hosted by the SMSF Association and ATO, ASIC technical adviser to the deputy chair Kate Metz said when advisers talk to clients about setting up an SMSF, they must critically assess why the client wants to set up an SMSF and determine whether it’s appropriate. 

“If you are an adviser and somebody comes to you and says ‘I really want to set up an SMSF because I really want to invest in property. I have heard it is the way to go. I have spoken to my brother-in-law and he has done this’. As an adviser, it is not enough that you rely on what your client wants,” she cautioned.

“You need to critically assess whether it is appropriate for them. Both the SMSF and the property investment.”

Ms Metz said ASIC expects advisers to “critically judge and tease out the reasons why someone is interested in setting up an SMSF” and make sure it is in the client's best interests.

While there are execution-only services, she said, it all depends on how that conversation goes.

“If you are an adviser and you say ‘Yes, you can go here and you can set it up, or I can set it up for you as execution-only advice.’ It is very unlikely that is execution-only advice, that will be personal advice, because if someone has come in to see you, there is an expectation that you will use your professional judgement and provide them with professional advice,” she said.

“I think we would take a very dim view of you simply trying to palm it off and saying that it is execution only.”

Since the removal of the accountants’ exemption, execution-only services have been used by some accountants, including those that operate under an AFSL, as a way of avoiding costly statements of advice for their clients.

DBA Lawyers special counsel Bryce Figot previously warned SMSF professionals that while simply providing factual information or execution-only services may work for simpler aspects of superannuation, it can become risky where it’s used for complex advice needs.

“I’ve spoken to a significant number of accountants who are licensed and aren’t very keen on doing statements of advice because they feel their client won’t value the extra value that the statements of advice give them,” Mr Figot said previously.

Jaime Lumsden Kelly from The Fold Legal has also previously cautioned accountants against establishing SMSFs on an execution-only basis without advising clients on the suitability of an SMSF.

“ASIC is likely to scrutinise this activity closely to find accountants who are still recommending SMSFs ‘off the books’ or ‘by implication’,” she warned.

ASIC issues warning on ‘execution-only services’ for SMSF setups
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