Audit Expert Shirley Schaefer has warned unlicensed accountants against giving advice over SMSFs.

Even providing execution-only services for their clients could be considered 'advice' in certain circumstances.

The Australian Securities and Investment Commission published a report into SMSFs last year.

This report focused on improving the quality of advice that investors have available to them for SMSFs.

The two parties that most people use to get advice about SMSFs are financial planners and accountants.

The findings from ASIC showed that around 80 percent of financial planner clients received a Statement of Advice relating to the funds.

However, fewer than 50 percent of accounting clients were given an SOA.

The Risk of Unlicensed Accountants

Unlicensed accountants often provide advice to their clients recommending SMSFs, and even provide advice about the fund itself.

However, they do not issue SOAs because they believe that they are acting in an execution-only capacity.

In the eyes of the client, however, this may not be the case, and it can be difficult for the accountant to prove how they were acting if things go wrong.

Execution Only in the Investment Industry

Execution-only services occupy an important space in the industry.

However, accountants must be careful about the image that they put forward when it comes to working with their clients.

If a client believes, however erroneously, that their accountant "told them they should set up an SMSF" then it is going to be hard to prove that this was not the case.

However, unless there is some clear documentation which emphasizes that the accountant was acting in an execution-only capacity, an SOA could prove invaluable should the client be dissatisfied with the performance of the SMSF.

The ASIC may opt to support the client's perception, whatever that perception is.

For this reason, advice providers must tread carefully when they are working with individual clients and establishing an SMSF for them.

Accountants Must Stick to the Facts

Accountants are now advised to 'stick to the facts' when discussing SMSF’s.

The ASIC defines factual information as information which is "objectively ascertainable and whose truth or accuracy cannot be reasonably questioned".

Accountants may still provide factual information to their clients however they must be wary of moving away from discussing facts to giving more general or personal advice.

This means that accountants must clarify with the client what the nature of the discussion is, and stress that they are not recommending a specific product or course of action.

There is a fine line between explaining the difference between specific types of funds and making a recommendation that one fund is better than another for an individual.

Accountants who would like to give advice should have a license to do so and should provide their clients with a General Advice Warning, at the time they give the advice, and in the same form as the advice.

So, if the advice is given over email then the GAW should be emailed as well.

The line between personal and general advice is blurry, and many accountants are opting to take refresher courses to ensure that they and their clients are properly protected and being served well.

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