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ASIC issues warning on ‘execution-only services’ for SMSF setups
ASIC has warned SMSF professionals that it will be taking a “dim view” of professionals who set up SMSFs on instruction from their clients without critically assessing whether it is appropriate.
Speaking in a recent panel hosted by the SMSF Association and ATO, ASIC technical adviser to the deputy chair Kate Metz said when advisers talk to clients about setting up an SMSF, they must critically assess why the client wants to set up an SMSF and determine whether it’s appropriate.
“If you are an adviser and somebody comes to you and says ‘I really want to set up an SMSF because I really want to invest in property. I have heard it is the way to go. I have spoken to my brother-in-law and he has done this’. As an adviser, it is not enough that you rely on what your client wants,” she cautioned.
“You need to critically assess whether it is appropriate for them. Both the SMSF and the property investment.”
Ms Metz said ASIC expects advisers to “critically judge and tease out the reasons why someone is interested in setting up an SMSF” and make sure it is in the client's best interests.
While there are execution-only services, she said, it all depends on how that conversation goes.
“If you are an adviser and you say ‘Yes, you can go here and you can set it up, or I can set it up for you as execution-only advice.’ It is very unlikely that is execution-only advice, that will be personal advice, because if someone has come in to see you, there is an expectation that you will use your professional judgement and provide them with professional advice,” she said.
“I think we would take a very dim view of you simply trying to palm it off and saying that it is execution only.”
Since the removal of the accountants’ exemption, execution-only services have been used by some accountants, including those that operate under an AFSL, as a way of avoiding costly statements of advice for their clients.
DBA Lawyers special counsel Bryce Figot previously warned SMSF professionals that while simply providing factual information or execution-only services may work for simpler aspects of superannuation, it can become risky where it’s used for complex advice needs.
“I’ve spoken to a significant number of accountants who are licensed and aren’t very keen on doing statements of advice because they feel their client won’t value the extra value that the statements of advice give them,” Mr Figot said previously.
Jaime Lumsden Kelly from The Fold Legal has also previously cautioned accountants against establishing SMSFs on an execution-only basis without advising clients on the suitability of an SMSF.
“ASIC is likely to scrutinise this activity closely to find accountants who are still recommending SMSFs ‘off the books’ or ‘by implication’,” she warned.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
What a communist society we have become. It appears ASIC is really working for the big banks and big investment firms. How dare a client assess what they want. how dare clients leave the big banks and industry finds. Glad to see ASIC there to make sure the banks and investment houses can continue to rip off the public without the trusted accountant able to assist. Glad to see ASIC continues to be the gate keepers for the rip of merchants and con artists.0- So ASIC say that if an individual rings me up as an accountant and wants to set up a SMSF, I cannot do it as execution only. Even though that is what they want to do.
Okay, now for consistency of approach by ASIC
If that same individual rings up an industry of public offer superannuation fund and wants to set up a superannuation account with them. It is okay for the fund to do that over the phone or they will send out documents for the individual to complete, as an execution only setup.
Why isn't the industry or public offer fund required to prepare a SOA for that client on the same basis as I am required to do when they ask me to set up a SMSF.
Why do the industry and public offer funds not have to do a SOA and advise them that there are many other potential superannuation funds out there that they could use and it could be in there best interests to set up a fund with another provider? Purely based on published returns and fees.
Now what is the difference?
Apart from ASIC thinking they are different.
They are both supposedly the same, a superannuation product to be dealt with and advised on as such.
Therefore they both require SOA's to be completed for each case - the individual who wants to set up an industry or public offer fund, or the individual who wants to set up a SMSF.
Therefore ASIC should be acting consistently in its approach to all superannuation providers who are approached to set up funds by individuals.
We can only wish.0- There is no consistency but yes you need to do more than execution only. I used to think accountants weren't dumb until I read the comments relating to this change. It's simple follow the law or don't assist them.0
- Next we will need hardhats to go to the toilet0
- Isn't that why politicians are mostly seen wearing hard hats, because they're spinning s....t?0
- The SMSF documentation on its own is not a Financial Services product therefore the set up does not require an SoA, it's the advice regarding suitability and associated services (bank acct, rollovers, insurances, other investments etc) that is where the issue lies. Anyone can go onto Cleardocs and buy the documentation because that's all it is...documentation.0
- So now we have to protect clients from themselves - good luck with that0
- ASIC desperate for runs on the board after a lfetime innings that has achieved nothing.0
- So a person walks into a bar & meets an accountant, financial planner & SMSF administrator.
Glad to see you here, I want to setup an SMSF.
The accountant says well I can tell you about an SMSF but I cant set one up. I dont have a FP licence & ASIC says I cant talk to you.
The financial planner says I can help you but I am going to have to setup a meeting, prepare an SoA (at costs of $X,XXX)& but if an SMSDF is not suitable then I cant help you.
Ah, the administrator pipes up & says I have a website. You can go there & fill out all of the forms.
The persons asks how can you do that. The planner inquires - but you have a licence? Yes says the administrator but thats so I can clip the ticket on bank accounts term deposits & share trades only. I dont provide advice.
THe whole advice / licencing model around SMSFs is a joke. It is not a level playing field & instead of taking a dim view of execution only ASIC should take action & ensure that all participants in the market are treated fairly & most importantly that client interests are protected.0- Cheers Bruce. An amusing read, but sadly all true!0
- Nicely expressed Bruce. Recently I saw a firm discounting this type of work in the pursuit of quick year end revenue/sales. Surely that’s enticing people to set up an SMSF with zero understanding of their ability to run one. Guess someone was given a “project” but setting up an SMSF is a little different to buying a $10 deck chair at the checkout of the local hardware store.0
- "it all depends on how that conversation goes?" That is about as good as saying "how long is a piece of string" in relation to: when and when not to give advice. If ASIC provide such vague guidance, then there is little wonder that the financial advisory sector has so many issues. Clarity is the key. Provide a mandatory form, with specific guidance that all should use, including SMSFS trustees as a base. The checklist to tick and flick, so that the appropriate issues are brought to the users attention and hopefully considered. For advisors this base document would progress to an SOA, but again, ASIC should provide the template. Make the advise document consistent and comparable and concise. It will be easier for ASIC to review, the user may obtain a second opinion and have NO issues comparing the two documents and maybe fees may reduce if the template is provided?0
- ASIC is bonkers and doesn't understand the legislation they are supposed to police. If an accountant advises on the suitability of an SMSF for a particular client he is giving advice on a financial product, hence needs to be licensed. However an accountant does NOT need to be licensed for execution only. You can't combine the two and execution only is just that: execution only without advice.0
- So ASIC would prefer us to rip the client off by charging for a SoA that recommends exactly what the client wants in the first place. Target the spruikers not professionals trying to do the right thing by their clients.0
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