FOS flags dispute risk areas for accountants
The Financial Ombudsman Service (FOS) has identified several areas where accountants may need to pay extra attention to avoid disputes, including the suitability of SMSFs and insurance.
Ombudsman Allison Maynard said accountants need to consider the cost and administration requirements of an SMSF and to weigh those up against the benefits to the client of having an SMSF fund.
“We often see disputes where the balance that’s being transferred into an SMSF doesn’t seem to warrant the expenses and administration that would be involved in administering an SMSF,” said Ms Maynard.
“Sometimes there can be good reasons why you do that, but I think any advice that’s given to someone to set up an SMSF needs to be very clear about the reasons about why someone is setting up an SMSF, and why alternative arrangements aren’t considered suitable.”
Other disputes can arise where the applicants clearly do not have an understanding of their responsibilities as trustees of the SMSF, and are not capable of carrying out the functions of the trustee – it isn’t all just set and forget with an SMSF.
She also stressed the advice needs to look at what the client is being taken out of.
“If they’re being advised to, say, move from one super fund to another, well what is it that they’re losing by moving from where they are?" she asked.
"Sometimes we see people moved out of defined benefit schemes where there needs to be very clear disclosure and discussion around someone being moved from something like that."
Accountants also need to be careful where a client is looking to set up an SMSF but have insurance with their existing superannuation arrangements.
“If clients are in their 50s and have health conditions, then there are issues regarding insurance and whether the existing superannuation arrangements should be kept because the client can’t get equivalent insurance,” she said.