Navigate limited licensing exemptions with caution
Accountants need to use caution when navigating exemptions in the limited licensing system, as even innocent comments made during conversations with clients could be construed as “incidental advice”, according to an industry consultant.
Speaking in a webinar hosted by Accurium on Friday, Prosperity Financial Services principal director Nidal Danoun said he often received queries from accountants with SMSF clients around how much information they could give without straying into territory which required a financial services licence.
“The way the advice world works from the point of providing factual information to providing product advice, you can be crossing the line without noticing sometimes,” Mr Danoun said.
“If you are providing factual information, beware of incidental advice because even if you say to the client ‘I have an SMSF and it’s been great for me’, there’s an objective test that a reasonable person could construe it to be a statement of recommendation from a trusted adviser.”
Mr Danoun said ASIC had recently been “quite active” in its focus around who was setting up SMSFs and why, and as such accounting practices that were not licensed and had large numbers of clients setting up SMSFs in a given year could come under scrutiny.
“If you want to operate in the exemption world and in a year you have one or two SMSFs set up, there would be a clear justification for that in saying that you don’t set them up all the time and maybe the client asked you to in that case,” he said.
“But if practices who have been quite active in this space try to substantiate that they are just giving factual information and the clients just got up one day and wanted to set up an SMSF, that is not a very defensible position.”
Mr Danoun said while it was understandable that SMSF clients sometimes did not want to wear the costs of full advice to set up their fund, accountants also needed to consider their own legal position when trying to assist.
“I hear this so many times where the accountant says, ‘This is what the client wants and we are going to set the SMSF up with no advice’. I would say be careful because it something goes wrong, all of these things will boil to the surface and the client will try to blame other people for their misery,” he said.
“I know we all have clear intentions as professionals to help our clients, but it is important to not put your practice at risk as part of that.”