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ASIC’s Advice for SMSFs RG 205

Anyone would think that ASIC had the accountants’ exemption expiry in mind with this timely offering!  The key points are:

Relevant Conduct and Disclosure Obligations

  • A reminder (or an informer) that LARs have a best interest duty (s961B, G and J).
  • A reminder to give clients an SoA before the clients act on advice.
  • All SoA’s covering SMSF’s must include switching advice.
  • Without appropriate consideration you will be in breach of your obligations.

Lack of Statutory Compensation

  • LARSs must advise clients that they will fall outside of the compensation framework available to investors in APRA funds. This means they will not be eligible for compensation if the SMSF suffers loss as a result of theft or fraud in an underlying investment.
  • Without appropriate consideration you will be in breach of your obligations.

Impact of Insurance

  • LARs are obligated to consider appropriate and affordable insurance and include this information in the SoA. ASIC warn of severe concerns if a client had cover prior to the establishment of an SMSF but not afterwards.
  • Without appropriate consideration you will be in breach of your obligations.

finance wise note: virtually no LAR is authorised to provide product advice so good luck with that one.

Access to Complaints Mechanisms

  • LARs are obligated to communicate the inability to access certain dispute mechanisms. ASIC warn of severe concerns if a client is uninformed.
  • Without appropriate consideration you will be in breach of your obligations.

The appropriateness of different SMSF structures

  • ASIC explain that will be greatly displeased where clients have been inadequately advised on SMSF structures.
  • Without appropriate consideration you will be in breach of your obligations.

Trustee obligations

  • ASIC are likely to look unfavourably on advice documents that exclude clear communication concerning trustees time, skills and obligations necessary to operate an SMSF.
  • If there is no consideration you will be in breach of your obligations.

Trustee obligations to develop an investment strategy

If the advice concerning a SMSF’s Investment Strategy is inappropriate given the members risk appetite and investment goals you will be in breach.

finance wise note: this topic is not covered in dfp 1 or dfp 2.

Additional information to be included in a SoA

  • A LAR needs to describe potential benefits that may be lost and other significant consequences of switching. This sounds similar to a previous area but ASIC are specifically interested in exit fees or other charges; loss of rights or benefits like insurances and compensation; loss of other opportunities ie discount health insurance or free financial advice; tax consequences; and anything else ..
  • Without appropriate consideration .. etc.

The finance wise Solution

Join our license as a LAR and this is all dealt with via our SoA template and prior to that our induction video and our practice integration process.

Register your interest in becoming a finance wise Limited Authorised Representative.

What happens at 9am on 1st July 2016 when a client seeks your advice on SMSFs? (RG146 Part 2)

Continued …

In our view accountants will find it very confronting when the accountants’ exemption expires on 1 July 2016.

Finance wise takes the guess work out of the process with our unique LAR portal. Once the assessment has been completed a LAR will receive an authority, a password and a log in. This will enable a LAR to enter initial client contact details, as soon as an email address is entered, the FSG is sent. Base one compliance completed automatically.

The next step is to complete the Needs Analysis. The client contact details are already saved, the LAR will add assets, liabilities, income, expenses, superannuation details and risk insurance held inside the super fund. Once those fields are all completed a risk profile questionnaire is completed along with a 100 point check. Form then printed and signed by the client. Second Base is completed.

Third Base is the most complex aspect, this is where you make your recommendations in a Statement of Advice (SoA). The data captured in steps one and two migrates into the SoA template and you are unable to proceed unless all fields are completed. Thus, you will justify your recommendation, complete an analysis of your client’s existing super funds and include your fees for service. Your client considers your advice and then agrees to proceed, declines to proceed, or proceeds with variations to your advice by signing the SoA. The Home Run occurs when the client receives your tax invoice (again an automated process). The client pays fwgs and you receive your client fee in the weekly LAR payment run. Yes weekly, we are advisers we understand cash flow.

Now, I have made 8 – 12 hours of work sound straight forward and it is with our system. If an accountant has some curve balls to deal with, then what? Ask yourself the question and feel the sense of dread.

Register your interest today in finance wise’s boutique accounting exemption solution.  We offer face-to-face RG146 training.

What happens at 9am on 1st July 2016 when a client seeks your advice on SMSF’s? (RG146 Part I)

Are you ready for 1 July 2016?

The best way to answer this question is to reflect on my own experience.  I recall a sense of dread bordering on panic. When face-to-face with a client the (mainly irrelevant) DFP 1 or DFP 2 means nothing. My accounting degree and marketing degree didn’t offer much help either. There will be aspects of the advice process that will be innocently and unintentionally neglected simply because most training programs do not map out what is required and when.

I have worked in financial services for nearly three decades and operated a license since 2011.  Based on my experience, my observation is that accountants have been underwhelmed with advice and support from their peak bodies concerning the accountants’ exemption expiry.

An AFS Licensee has direct client liability. This isn’t breaking news and represents the main reason an accounting firm would be reluctant to operate their own license. Financial advisers are being sued most days in the working week. Operating my own license means I absolutely cannot allow non-compliance.

How will you and your practice comply on 1 July 2016?

To be continued …

Please look out for tomorrow’s news feed about SMSF advice from 1 July 2016.

Register your interest today.  We offer face-to-face RG146 training – courses booked in Sydney, Adelaide and Perth.