SMSF advisers need to consider their business circumstances carefully and look to adopt stronger procedures around client engagement and onboarding, if they want to manage their business risk properly in the current regulatory environment, Argyle Lawyers managing principal Peter Bobbin says.
Robust due diligence and risk management are now vital for SMSF professionals and are also in the best interests of clients, Bobbin says.
“Advisers needed to recognise that when something goes right with an SMSF engagement, nothing will be said, but when something goes wrong, the client will be looking for someone to blame,” Bobbin tells Professional Planner ahead of his upcoming appearance at the SMSF Association Technical Day. “If there are problems, they will be looking to see if you are the one who has professional indemnity insurance.
“If you do not reject at least some clients, then the questions you are asking prior to engagement are not the right questions. If you have not sacked an existing client, then you are accepting a standard that is exposing you.”
SMSF advice practices also need to recognise the importance of managing cross-occupational professional standards, Bobbin notes.
“The SMSF profession is an area where most professionals are multi‑disciplinary – such as being a lawyer and an SMSF adviser – so they have obligations in other professions to consider as well.”
SMSF professionals need to consider their duty towards other SMSF advisers if they are both members of the same professional body. This is particularly important for members of the accountancy profession, as the professional bodies in this field have detailed ethical and professional rules covering situations where a client is moving between practices.
Prior to accepting a new client engagement, SMSF advisers need to consider any ethical questions involved carefully.
“Ask yourself if there are any ethical reasons why you should not take on a client,” Bobbin says.
From a risk-management perspective, it is valuable for an SMSF adviser to understand why the client is moving from their previous adviser.
“It could be as simple as geographic convenience, but asking this question allows you to identify if there is an obvious risk issue,” Bobbin explains. “If it is because the previous adviser charged too much, that could be a warning sign about payment problems down the track.”
Issues around client engagement and termination of a client relationship are rarely discussed by professional advisers.
“If you decide to terminate a client relationship, you need to provide formal notice and give a specific date from which you will no longer be supporting the client,” Bobbin says.
If the SMSF client is on a yearly retainer, an adviser cannot simply terminate the client unless they are willing to give back the remaining balance of the annual retainer.
SMSF professionals should see robust engagement and onboarding processes as a way to demonstrate they have an ethical and professional advice practice,” Bobbin explains.
“Better systems and processes lead to a diminution of problems and allow you to achieve a greater and deeper client interface and communication,” he notes.