Can planners be negligent not recommending SMSFs?
A specialist financial services lawyer has questioned whether financial planners will be acting in the best interests of their clients if they do not recommend the establishment of a self-managed superannuation fund (SMSF) where an account balance is in excess of $500,000 to $700,000 and higher.
In a clear response to the Australian Securities and Investments Commission's (ASIC's) "soft benchmark" of $200,000 being the minimum account balance necessary to establish an SMSF, Townsends Lawyer's, Michael Hallinan, suggested a reverse rationale might be applied to high account balances.
He questioned whether it was it could be deemed entirely appropriate for people with higher account balances to be left in either a retail or industry fund, rather than being recommended into an SMSF.
"If ASIC considers that an adviser who recommends the establishment of an SMSF where the fund balance is less than $200,000 may not be adequately discharging their duties as an adviser, will ASIC consider that an adviser who does not recommend an SMSF where the client has $500,000 or $700,000 (or some other suitably larger figure) in a retail or industry fund also not be adequately discharging their duties?" Hallinan asked.
Responding to industry feedback on advice around SMSFs, ASIC last month nominated $200,000 as its "soft benchmark" around self-managed fund establishment.
It said it considered "that SMSFs with balances below this amount are less likely to be in the client's best interests"
However, the ASIC response added, "this benchmark does not preclude an adviser recommending that an SMSF be established below this amount; however, we are likely to look more closely at advice that recommends establishing or switching to an SMSF with a balance below the $200,000 soft benchmark".
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