The tendency of independent self-managed super fund (SMSF) clients to treat their financial planner as a consultant rather than a trusted adviser and only seek advice about some issues could cause planners to fail the best interests test.
Concerns have been raised among SMSF advisers that independent clients who want total control over their investments and only approach their financial adviser to sign off on their own ideas could lead to planners failing the best interests test by being unaware of the client’s entire financial situation.
ipac South Australia superannuation strategist Peter Crump warned that a majority of SMSF clients were not treating their planner as a trusted adviser and were only approaching them to seek certain investment information, leaving the adviser incapable of considering other important issues.
"The ‘coach-seeker’ wants only a little help, they may want to ask for information and take it on board as they see fit, or ask for affirmation of what they’re proposing. In the current and proposed advice environment, that’s fairly difficult," he said.
SMSF advisers cannot engage on a single unique issue like the industry funds, and they need to convince their clients to have a higher level of engagement with their planner, Crump said.
Fiducian Financial Services adviser Michael Dale suggested advisers have to make clear to SMSF clients that answers to investment-specific questions fall under scaled advice and don’t take into account the client’s wider financial circumstances.
Financial planners must persuade their clients to show them their whole financial situation, Dale said.
"We have a duty to give the whole picture, because very often people are not aware of the ramifications of death, or estate planning issues for example," he said.
Seven out of 10 clients wouldn’t even be suited to an SMSF, Dale said.
Some clients use their SMSF to hold only managed investments, in which case they would be better off using a personal super provider instead, Dale said.
It was the responsibility of the adviser to tell clients if they would be better off with another option, he added.
Hewison Private Wealth director Andrew Hewison warned that SMSF advisers needed to document if they were providing limited advice to an SMSF client, to cover themselves in case they weren’t being fully informed.
"If they specifically state that they only want information on a particular area, then the adviser should provide a limited statement of advice detailing the fact that the advice only related to these areas," Hewison said.
Principal of Financial Services Partners practice Equilibrium Wealth Susan Du Chesne said a significant number of her clients preferred to make their own investment decisions while she provided the strategy behind the investments.
The client should make it clear if they want to make their own investment decisions and only want advice around strategy, Du Chesne said.
