The best way for SMSF professionals to avoid litigation risk is to clearly state to their clients what they can and can’t do for them, says lawyer and managing principle at Argyle Partners, Peter Bobbin.

Speaking at the Self-Managed Superannuation Fund Association Technical Day in Sydney, Bobbin said it is incumbent upon SMSF advisers to “ringfence” their ability – to clearly define what they can do and what they can’t. While being specific about what advisers put into the marketplace is important, Bobbin says, putting limitations on what to expect them to do is just as vital.

“Be particular about what you’re not doing, because it’s just as important as what you’re doing,” Bobbin explained. “I can take you through a whole range of other professional services cases, where the case turned wholly and solely on what the person didn’t do.”

He told the crowd the first thing they should do is an audit of their abilities. The title ‘SMSF adviser’ means nothing to the client, he said, because they have no idea what the boundaries are in the profession.

“When you do the audit of your ability, look at what you’re not capable of or don’t wish to do,” Bobbin said. “If you say nothing, [being able to do] everything associated with superannuation…is the standard to which you will be held.”

Bobbin explained that not all disclaimers are created equal. The good ones, he explained, have two sides.

He used the example of advisers simply telling a client they don’t do insurance, which is a one-sided, negative disclaimer. A two-sided disclaimer, he said, would be one in which the adviser also explained the value of insurance to the client and suggested they contact an insurance professional.

“Which of those two is a better disclaimer? The second, because there are two sides to it – positive and negative – and there is a call to action. Make sure your disclaimer has two parts, and the second part is always positive.

“You’re actually doing the client a service,” Bobbin continued, “because they might go out and get that professional service.”

Bobbin also implored advisers to get to know wives just as well as husbands. Among SMSFs across the country, 93 per cent have more than one member, he said, yet advisers often take instruction from only one of them.

“You’re taking instructions that impact the whole of the superannuation fund,” he said. “You’re also contracting specifically from [both of] them.”

Not only did engaging both parties lessen the risk of litigation, he explained, it also increased the value and strength of the relationships. Retaining the business of widowed clients could also have other benefits, he noted.

“The best investor is a single female, aged 45 to 55,” he said. “You know the worst? A married man, aged 45 to 55.”

Bobbin was frank in explaining to the assembled SMSF Association members why he was qualified to speak on the best way for them to “litigation-proof” their business.

“Because across my career, I’ve defended you,” he said. “I’ve mostly been successful. The times I haven’t been, it was because you deserved it.”

Share your comments and feedback with the editor
Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.