Can we simply allow clients to tell us to set up SMSFs?

Many accountants have diced not to be licensed and when a client comes along and instructs them to set up an SMSF they will happily proceed and get eth client to provide them with a disclaimer.

Well this is what a Westpac adviser by the name of Jason Atkins thought as well. And fair enough. Jason set up a number of SMSFs under instruction from his clients.  

ASIC decided to review these SMSF establishments and decided that the clients were worse off by having SMSFs with LRBAs. ASIC decided that Jason should have conducted a full investigation into his clients circumstances to determine if an SMSF would make them better off. This is notwithstanding the clients TOLD Jason to do it regardless. Sound familiar?

ASIC then banned Jason for three years from providing financial advice effectively wiping out his business. Of course Jason felt wronged so he appealed to the AAT. Amazingly the AAT agreed with ASIC and upheld the banning order.

Peter Kell from ASIC was quoted as saying:

The job of financial advisers is to help their clients by providing professional advice that leaves their clients in a better position, not to merely execute their clients’ wishes, especially when those wishes are going to leave their clients in a worse financial position

So it is clear that for financial planners they MUST do a full investigation but does that extend to accountants. No doubt it extends to accountants with a limited license but what about those with no license that actually aren’t allowed to conduct an investigation into the appropriateness of an SMSF to their client?

If you look at the comments from Mr Kell you could certainly see how they would also apply to an tax accountant. In fact it would extend to any professional who charges for their advice. Imagine going to a doctor with a sore shoulder and telling her that you just want a cortisone injection. No way would she just do it. She charges as a professional and has a duty to do the right thing by you. It is the same for you as an accountant.

Our Rules of Ethical Conduct (RECs) also place certain conditions on our dealings with our clients and we must always act in the best interests of our clients. Are you acting in the best interests of your client if you charge to set up an SMSF without determining if it is in their best interests? You could argues that you are saving them money. Well, that didn’t work Mr Atkins.

No, if you just want to act on instruction then you need to be set up more like and SMSF Admin company where it is publicly known that you merely act on instruction and charge accordingly.

Now you say: “Well I am not licensed so I can’t make a determination”. Too true. Now I go back to the RECs and the ethical principle of “Competence”. If you are not capable (because of licensing) of make a determination that an SMSF is the right option for a client then you may be in breach of the ethical principle of “Competence” if you continue with that engagement.

It is now more than ever the time for our professional bodies to step up to the plate and sort this ridiculous situation out.