Getting a Statement of Advice for your SMSF

Self Managed Super Funds have undergone increased regulations over the past few years. Prior to 2016, it was reasonably simple to get SMSF advice from an accountant, and receive support in setting your SMSF up. This permission for giving advice was known as the ‘accountants exemption’.

This changed in 2016 during the Financial Advice Reforms. The federal government removed this exemption, meaning that accountants were then subject to stricter rules in the financial advice they could give.

Under these reforms, anyone providing SMSF advice must be licensed under an Australian Financial Services Licence. Their advice must also be formally documented in a Statement of Advice.

Liston Newton Advisory provides expert financial advice for your Self Managed Super Fund. Contact us today to discuss your situation, and we can organise a Statement of Advice your SMSF support.

What is a Statement of Advice?

A Statement of Advice, commonly referred to as an SOA, is a written statement that explains particular advice provided by an adviser to their client. It’s a written record that acts as evidence of the specific instructions, guidance, and ideas proposed by the adviser, and how they state it should be implemented.

A good SOA will outline the client’s financial circumstances, their goals, their appetite for risk, and details the adviser’s advice to them. It should also highlight any alternative strategies and next steps.

In order to protect both the adviser and the client, an SOA should also include the necessary disclaimers and statutory disclosures. These ensure the advice is considered as suitable for the clients’ needs, that it’s reasonable, and to detail any remuneration disclosures or conflicts of interest.

When and why do I need a Statement of Advice?

An SOA is necessary for seeking many kinds of legal and financial advice. An SOA is particularly necessary when you’re seeking advice on setting up, running, or closing out your SMSF.

The easiest way to determine whether or not you need an SOA for your SMSF is when you’re seeking a recommendation. Are you asking for a professional’s advice on something?

For example, you might be unsure if a SMSF is right for your financial situation. If you engage a professional to provide a recommendation on the type of structure for your super, then this is classified as financial advice. You’re seeking a recommendation — so you need an SOA.

Alternatively, if you’ve done your own research and simply want a SMSF set up for you, then you might engage an accountant to help complete the SMSF documents. In this case, you’re not seeking financial advice, so you don’t need an SOA.

You’ll need an SOA if you’re seeking advice on:

• Whether or not you should set up a SMSF
• How much you should contribute to your SMSF, or if you should salary sacrifice
• Whether to start or stop a pension
• If you should withdraw money from your super fund
• How, when, and what assets to invest in
• Recommending the appropriate beneficiaries within your estate management

When is a Statement of Advice not required?

While your accountant provides you with financial advice and recommendations, there are some services they provide that don’t need an SOA.

The easiest way is to think of it like this:

• If you’re going to them to ask a question, or to ask for personal or professional financial advice, then you may need an SOA.
• If you’re seeing your accountant to discuss instructions, or assistance in performing a task, then you likely won’t need an SOA.

Reasons for not requiring an SOA can include:

• Explaining how a SMSF works
• Helping you set up a SMSF, after you confirm you want to set one up
• Helping to fill out SMSF documents or completing paperwork in order to make investments
• Providing guidance on the steps to take to remain compliant with your annual SMSF tax return
• Helping you set up a super pension, based on the trustee’s instructions
• Assisting with the rollover of super balances, on instruction of the trustee

How to create a Statement of Advice

An SOA for your SMSF isn’t something you can do yourself, it must be created by a licensed financial adviser. However, it’s not an onerous process.

Here’s how your financial adviser can help you create an SOA.

1. Meet with your financial adviser to discuss your situation
2. Let them know that you’re seeking advice from them on a certain topic
3. They will then go ahead and do the necessary research, and return to you with the options available to you. These options will be presented in a Statement of Advice
4. Once you agree on the advice, your financial adviser will help you to implement it

Your Liston Newton financial adviser is here to help you with this process.

The final word

While undergoing the SOA process for you SMSF has its benefits, it also has some drawbacks you should be aware of.

The most obvious of which is the added time and cost of getting advice on and setting up your SMSF. The world of financial advice is heavily regulated, so great care must be taken by your adviser when providing you with their advice.

It’s a formal process, and means your adviser must have a thorough understanding of your situation and the outcomes of the advice. The outcome of this is that you’ll need to provide them with more detailed information and paperwork.

But by getting a detailed SOA, you’re ensuring that every option available to you has been explored. Your adviser has taken the time to delve into your circumstances, and is providing advice that’s complete, and not rushed.

You can take comfort that you’re receiving professional, unbiased advice that’s specific to your situation. All your different circumstances have been taken into account.

While detailed, this advice will be explained to you in simple terms, and you’ll have clear, written advice on the pros and cons of each SMSF recommendation available. It’s a document that you can then use a reference point for the long-term.