Powered by MOMENTUM MEDIA
subscribe to our newsletter

Investment strategy advice needs cautious approach

Lyn Formica
Adrian Flores
11 June 2020 — 1 minute read

Accountants looking to provide effective investment strategy advice for SMSF trustees must tread carefully to ensure they are not contravening Corporations Regulations, warns an administrator.

In a blog, Heffron head of SMSF technical and education services Lyn Formica said trustees often turn to their fund’s accountant to comply with requirements to “formulate, regularly review and give effect to” an investment strategy.

“Accountants are generally prohibited from providing advice in relation to financial products unless they hold an Australian financial services licence (AFSL),” Ms Formica said.

Advertisement
Advertisement

“However, accountants can provide some services to SMSFs without being covered by an AFSL, either because the services are not financial product advice or they are covered by an exemption.”

As examples, provided accountants give appropriate warnings, she said an unlicensed accountant can provide a fund trustee:

  • Factual information about investment strategies (for example, what trustees are required to consider, how to document one which will stand up to ATO/auditor scrutiny).
  • Advice on the operation or structure of their SMSF, provided the advice is for the sole purpose of, and only to the extent reasonably necessary for, ensuring compliance with the superannuation legislation [Corporations Reg 7.1.29(5)(c)]. Importantly, this exemption does not apply to advice given in relation to SIS s.52B(2)(f) or Regulation 4.09 of SIS (i.e. the provisions requiring an investment strategy).
  • Broad asset allocation advice within their SMSF (for example, what proportion of funds should be allocated across one or more investment categories) [Corporations Reg 7.1.33A].
  • Advice on the tax implications of acquiring, holding or disposing of an interest in an SMSF or a financial product held through the SMSF [Corporations Reg 7.1.29(4)].

What accountants should and shouldn’t do

Ms Formica laid out some key points for accountants wanting to help SMSF trustees with their investment strategy.

DO

  • Explain to trustees the things they need to consider in formulating their investment strategy.
  • Help trustees articulate the investment decisions they have made using the correct terminology and language, and with sufficient detail to meet the ATO’s requirements.
  • Compare the fund’s documented investment strategy with the fund’s actual investments at appropriate intervals, and identify where the trustees might be investing outside their documented strategy.
  • Help trustees document the regular review of their strategy which may include helping the trustee to articulate a change in their strategy or confirm that no changes were required.

DON’T

  • Provide a recommendation for the trustee to make particular investments through their SMSF.
  • Advise the trustees on what the fund’s investment strategy should be (for example, what their target investment return should be and how to achieve this).
  • Provide a recommendation for the trustee to modify their investment strategy or investments.
Adrian Flores

Adrian Flores

Adrian Flores is the deputy editor of SMSF Adviser. Before that, he was the features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at This email address is being protected from spambots. You need JavaScript enabled to view it..

Investment strategy advice needs cautious approach
lyn formica new smsf
smsfadviser logo

Are you up to date with the legislative changes from 1 July? Contribution cap increases, super guarantees, age increases, SG rate increases. The budget announcement changes. Don’t be caught off guard by your clients’ questions. Prepare for any scenario with the SMSF Foundations course. 21 CPD hours available. Learn more

Arm yourself with the critical information that you need to ensure you and your clients continue to thrive in today’s changing environment at the free-to-stream SMSF Adviser Technical Strategy Day. Live streamed directly to you in October over three days, this event is jam-packed with expert-led sessions to arm you for success by providing the latest updates on regulatory and legislative changes impacting SMSFs. Secure your free spot today, visit www.smsfstrategyday.com.au

join the discussion

Latest poll

Do you have clients that are aged 65 or 66 planning to trigger the bring forward rules?

SUBSCRIBE TO THE
SMSF ADVISER BULLETIN

Get the latest news and opinions delivered to your inbox each morning

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.