According to Holley Nethercote partner Grant Holley, there are a lot of misconceptions surrounding the best interests duty imposed by the Future of Financial Advice reforms as it pertains to SMSF specialists.
Speaking on a panel at last week’s Association of Financial Advisers (AFA) conference on the Gold Coast, Mr Holley laid out exactly what the fiduciary duty means for SMSF advisers.
“My favourite generalisation is ‘all generalisations are dangerous’ and SMSFs is an area where there has been a lot of generalisation,” he said, listing such often-heard debates as the minimum balance entry-point issue and the amount of experience required for trustees.
“The question that needs to be asked is simply ‘Is an SMSF the most appropriate vehicle for this particular client to arrange for their retirement?’” Mr Holley added.
SMSF practitioners will be required to weigh up a “number of factors” on an individual ad-hoc basis, including cost-effectiveness, whether a similar outcome may be possible for those clients in an APRA-regulated fund and whether they are aware of the lack of compensation options open to them.
“The danger is when it is being driven by business model,” Mr Holley said, warning against placing people into SMSF structures where it is not in the client’s best interests.
One would also assume that the same applies for people convincing clients not to go to an SMSF. Generalisations in this regard would be just as guilty of wrong doing. Any I hear and read a lot of generalisations coming from the non-SMSF sector.
If you don’t know whether or not the client is capable of running a SMSF in an efficent manner before they arrive to discuss the issue then the odds are they are not.
IE know your client