Don’t let clients enter an SMSF without an exit strategy

Kate Cowling

By

February 14, 2018

Advisers must consider exit strategies when setting up a self-managed super fund and that includes ensuring clients appoint an enduring Power of Attorney to protect them as they age and potentially face capacity issues, a technical specialist says.

The Australian Securities and Investments Commission expects advisers who establish SMSFs to outline exit strategies for clients should they need to close the fund, says Julie Steed, senior technical services manager at Australian Executor Trustees.

Common reasons trustees close their SMSF include having a low balance, which may encourage them to shift to a small fund, death, divorce or capacity issues, she says.

“ASIC has previously expressed concerns that SMSF files they reviewed didn’t have exit strategies,” she says.

Steed says the provision to explain winding up SMSFs was surprising to advisers. “I don’t think I’d ever seen an exit strategy in a [Statement of Advice]. You don’t tend to have the end in mind when you’re setting up an SMSF.”

In a session on Wednesday afternoon at the SMSF Association National Conference in Sydney, Steed plans to cover strategies and alternatives for clients who want or need to close their fund.

She says the session is timely, given the increased attention on elder abuse and ensuring clients are well set up as they age. For advisers, that means putting the right protection mechanisms in place, she says.

“In my opinion, it should be a condition that you shouldn’t be able to establish an SMSF if you don’t have an enduring Power of Attorney,” she says.

In other scenarios, clients may just want to close their SMSF because they are less focused on it than they were when they started.

“In a lot of instances, they started their SMSF journey when they are 55 and the interest just wanes over time,” she explains.


TOPICS:   SMSFA National Conference 2018

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