Trust structures faulty: Bobbin
Trusts are faulty and advisers need to design self-managed superannuation funds (SMSFs) specifically for their clients’ situations while also ensuring rights are held outside of super, according to principal of Argyle Lawyers Peter Bobbin.
“Trusts are stuffed — you can’t trust them,” Bobbin said during his session at the Self-Managed Super Fund Professionals’ Association of Australia (SPAA) conference in Melbourne.
“Clients have a substantial amount of wealth in structures they don’t understand. Even the courts battle to work out what they are,” he said.
“You need to remember where I come from — I come from the dark side of life,” Bobbin added. “Some 95 per cent of people are moral and will do the right thing, but I see the other 5 per cent — and so do the courts.”
Because some people will take advantage of the law to the detriment of others, Bobbin said advisers needed to tell clients about strategies that will protect their assets and ensure that they go where the client intends upon their death.
“There are strategies you can employ outside of trust law, based in century-old law, that are paramount,” Bobbin said. He added that one of the advantages of SMSFs is that they give the client the greatest level of control.
“SMSFs allow almost perfect flexibility, but it’s not being used,” he said. “You should be challenging the client to create something that suits them and their family situation.”
He said super can be designed to address future eventualities such as divorce. He gave an example of a client who couldn’t access or deal with his super because his spouse wouldn’t sign the relevant papers.
“One solution is to have entirely different funds from the outset,” said Bobbin. He said that Binding Financial Agreements (BFAs) could be drawn up specific to super.
“BFAs can spell out who has control of each asset, or what would happen in the event of separation. Don’t just deal with the division of the super — make sure you address the decision making as well.”
He said advisers can also borrow from Mutual Wills Agreement law to ensure that the person’s initial intentions in their will are protected to a certain point against any subsequent changes made by their spouse after their death.
Recommended for you
Sequoia Financial Group has declined by five financial advisers in the past week, four of whom have opened up a new AFSL, according to Wealth Data.
Insignia Financial chief executive Scott Hartley has detailed whether the firm will be selecting an exclusive bidder for the second phase of due diligence as it awaits revised bids from three private equity players.
Insignia Financial has reported a statutory net loss after tax of $17 million in its first half results, although the firm has noted cost optimisation means this is an improvement from a $50 million loss last year.
With alternative funds being described as “impossible” for fund managers to target towards advisers without the support of BDMs for education, Money Management explores the evolving nature of the distribution role.
