30 March 2016

Is your SMSF adviser right for you?

It’s no secret that SMSFs are regulated by a complex and frequently changing set of laws and regulations making maintaining compliance and optimal operation within this legal framework an increasingly challenging task. This is why many SMSF trustees (or directors of a trustee company) turn to specialists to help guide them through this maze to ensure their obligations are met.

However, despite the risk of hefty penalties and, of course, the moral issues involved, the unfortunate reality is that there are some firms and advisers who continue to mislead fund trustees in order to achieve personal financial gain.

With this in mind, along with the rapid growth seen in SMSFs, increasingly aggressive advertising, the collapse of Trio Capital and the subsequent Parliamentary Joint Committee on Corporations and Financial Services inquiry, the Australian Securities and Investments Commission (ASIC) set up their SMSF Taskforce in 2012.

Initially the Taskforce’s key focus areas included high-risk and emerging SMSF issues such as property spruiking, unlicensed conduct and false or misleading advertising. However more recently this focus has expanded to include the promotion of SMSF services via social media sites too. Since inception the Taskforce has carried out frequent investigations, a number of which have resulted in the issuing of large fines, industry bans and/or imprisonment.

An example includes the case of Park Trent Properties Group which had been unlawfully carrying on a financial services business for over five years by providing advice to clients to purchase investment properties through a SMSF. By the time of the trial in mid 2015, Park Trent had advised over 860 members of the public. The company was served a permanent injunction against it restraining them from providing unlicensed financial product advice to clients regarding SMSFs.

More recently, a Sydney woman was charged with dishonestly obtaining a financial advantage by deception and separately, for dealing with over $100,000 that was the proceeds of crime. The woman in question was charged with these offences following a SMSF Taskforce investigation into her conduct in dealing with members of SMSFs which were undertaking property purchases. The matter is listed to return to court on 12 April.

Although trustees may outsource some of the essential functions of running a SMSF to SMSF advisers, like investment management and administration, trustees are still ultimately responsible for the operation of their fund. With this in mind, the above examples serve as a timely reminder of the importance in doing your homework on advisers before engaging with them in SMSF advice.

To help safeguard super savings there are a few simple steps trustees (and directors of a trustee company) can take to help ensure they engage with a trustworthy, experienced and qualified SMSF adviser.

 

1. Ask around

The ultimate testament to a financial adviser’s credibility is a referral from one of their existing clients or professional partners. Talk to friends and colleagues to see what experiences they’ve had with their advisers.

 

2. Look them up

Be sure to check ASIC’s financial advisers register to confirm the adviser’s qualifications and experience, their employment status and that they haven’t been banned or disqualified from giving advice

 

3. Get an FSG

Download a copy of their financial services guide (FSG) from their website or ask for one to be sent to you. This document will outline what services are being offered along with other valuable information on how they charge, their Australian Financial Services Licence (AFSL) number and any linked product providers.

 

4. Ask questions

How many SMSF clients do they have? In what detail do they undertake them? What is their investment philosophy? What is their retirement planning process? Don’t hold back, if there is a question you want to ask, ask it!

 

5. Trust your instincts

If you don’t feel comfortable after your first meeting with an adviser, walk away. It is imperative that you feel confident that they will be honest and transparent and that you are compatible in terms of personality and style of doing business. Also remember if it sounds too good to be true, it probably is!

 

By law, SMSF trustees and directors of a trustee company are required to meet a certain set of obligations and failure to do so can result in the fund being deemed non-compliant and losing its tax concessions, being disqualified as a trustee, penalties and/or prosecution.

For this reason, a good option for many members is to seek advice from a specialist SMSF adviser. Although there is no absolute way to guarantee the integrity of an adviser, a little care and due diligence can help to protect your fund and your future retirement benefits.

If you would like to discuss your SMSF in more detail, please feel free to get in touch on (07) 3391 5055 or by emailing advice@mgdwealth.com.au.

 

Disclaimer: This article contains general information only and is not intended to constitute financial product advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. It should not be relied upon as a substitute for professional advice.