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‘Shift in liability’ flagged in SMSF documentation
A recent incident where an accountant was sued after an issue with their estate planning advice points to an increasing threat of liability for accountants and planners involved in organising their clients’ SMSF documentation.
Given the availability of online documentation and accountants’ move into financial advice, SMSF professionals are increasingly involved in structuring their clients’ documentation trail.
The document is partly produced by the document provider, but in cases where additional information needs to be filled in, responsibility typically falls on the professional who is filling it in with the client, Estate Planning Equation’s director Allan Swan told SMSF Adviser.
“You do have a shift in liability moving away from the entity who is purported to prepare the documents to the people who actually fill in that information,” Mr Swann said.
“So if the client is doing it off their own bat and doesn’t have any connection with their accountants, well it’s obviously the client’s problem. But if it’s the accountant who is the one helping the client filling in the information and gets it wrong, well then it’s the accountant’s problem,” he said.
“It’s the way of the world now. It’s the risk that people run. As long as things go well, everything is fine. But when things don’t go well and something serious goes wrong, well then the client will want someone to sue and the accountant is a nice target.”
Mr Swann cited an example of a case where an accountant assisted a client in preparing a binding death benefit nomination (BDBN), but nominated someone who was not a dependent to receive the funds. The person who was meant to receive the money ended up suing the accountant.
Mr Swann said he “imagines it will never get to court because it’s just such obvious negligence”.
"Dear SMSF Adviser, why not call the article, Accountant sued for giving AFSL BDBN advice with zero AFSL compliance and knowledge. Because that's exactly what has happened.
Yes the accountant has likely operated under the old accounting exemption to enable the legal set up an SMSF for the client.
But as soon as they go beyond the basic set up of the SMSF, like giving the client unlicensed AFSL death benefit nomination advice they have gone beyond the limited scope of the accountants exemption and provided AFSL advice about a death benefit with zero AFSL compliance. So of course the accountant should be sued if it goes wrong as they have acted illegally.
Two very important questions :
1) will the accountants PI cover them for the claim ? Quite possibly not as they have provided illegal AFSL advice about a BDBN without an AFSL.
2) how many other accountants have set up an SMSF for a client under the guise of the accountants exemption but have also strayed outside that limited exemption and given AFSL death benefit nomination advice? One would think there is literally hundreds of thousands of these situations waiting to be tested ? Wow that's a massive liability sitting under the accountants butts just waiting to explode !!!!!0- Dear SMSF Adviser, why not call the article, Accountant sued for giving AFSL BDBN advice with zero AFSL compliance and knowledge. Because that's exactly what has happened.
Yes the accountant has likely operated under the old accounting exemption to enable the legal set up an SMSF for the client.
But as soon as they go beyond the basic set up of the SMSF, like giving the client unlicensed AFSL death benefit nomination advice they have gone beyond the limited scope of the accountants exemption and provided AFSL advice about a death benefit with zero AFSL compliance. So of course the accountant should be sued if it goes wrong as they have acted illegally.
Two very important questions :
1) will the accountants PI cover them for the claim ? Quite possibly not as they have provided illegal AFSL advice about a BDBN without an AFSL.
2) how many other accountants have set up an SMSF for a client under the guise of the accountants exemption but have also strayed outside that limited exemption and given AFSL death benefit nomination advice? One would think there is literally hundreds of thousands of these situations waiting to be tested ? Wow that's a massive liability sitting under the accountants butts just waiting to explode !!!!!0
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