The white paper, titled Amending s923A for the post FOFA advice era is aimed at exploring how s923A of the Corporations Act can be improved for industry participants and consumers. This section of legislation outlines in what circumstances advisers can use restricted words and expressions related to independent financial advice.

The white paper stressed while it wasn’t critical of the SMSF structure or sector, it believes the parameters of s923A should be modified due to an anomaly in the system relating to internal SMSF administration services that are offered.

“[One] critical FOFA flaw is the inconsistent approach to classifying institutionally operated administration platforms as ‘financial products’ where advisers receiving a rebate back from the administration fee is considered conflicted,” the white paper stated.

“Then on the other hand under the same legislative framework, you can have an adviser offering their own internal administration service to manage a client’s portfolio under SMSF conditions that is inexplicably considered not to be conflicted.”

While SMSFs received specialised legislative treatment under FOFA/Corporations Law to make it lawful to operate in the manner, the AIOFP questioned whether this “satisfies the spirit of s923A” or whether it was fair to other advice operators.

“Any profits made on administering a client’s SMSF service can be used to cross subsidise practice infrastructure, something non SMSF advisers' independently owned advisers are not permitted to do post FOFA,” the whitepaper noted.

“It hardly seems fair that SMSF advisers have the opportunity to ‘package’ the internal client SMSF administration fee under ‘tax’ or similar advice and other non SMSF advisers are not afforded the same conditions to cross subsidise practice infrastructure costs.”

The AIOFP stated it was not advocating a return to platform rebates, however, only pointing out the “inconsistencies in FOFA’s application and why SMSF structures can compromise the parameters of s923A”.

Another unique circumstance that can arise from advisers providing advice on SMSFs, the paper said, is the ability to recommend direct property to clients.

“Direct property is largely out of ASIC’s jurisdiction, not an ideal outcome for deciding whether an adviser is acting within the confines of s923A,” it said.

“We recommend that the asset allocation within an SMSF should be products that fall within the ASIC regulatory framework if advisers want to be s923A compliant.”

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