- ASIC report 576 on SMSFs revealed a greater need for collaboration between SMSF professionals
- Financial planners are best positioned to play the project manager role in coordinating advice to SMSF trustees
- A family office model of collaboration is an effective structure to facilitate quality and consolidated advice
In June 2018, the Australian Security Investments Commission (ASIC) released Report 576: Member experience with self-managed superannuation funds, the findings of which highlighted a need for greater collaboration between SMSF professionals in service of the same trustee.
David Busoli, Practice Principal & SMSF Specialist Mentor at SMSF Alliance, will be speaking in the panel session, ‘Getting it right, from advice to audit’ at the 2019 National SMSF Conference this October. The session will explore current challenges, including how SMSF professionals can collaborate to provide trustees with the best service possible.
Who should be the leader?
Report 576 found that SMSF trustees were often confused when receiving statements of advice (SOAs) from multiple parties, and perceive property one-stop-shops as attractive providers of advice who remove the complexity of having to deal with multiple parties.1
These results indicate that despite all parties having the best intentions, there is a need for a single party to play the role of ‘project manager’ in order to effectively and efficiently coordinate advice given to an SMSF trustee.
According to Busoli, financial planners are best positioned to take on this role. He argues this role requires a broad understanding of the client’s overall position, as well as other nuances that may affect a trustee’s position.
“Financial planners know their clients best, and not just their financials but all other elements that factor into their position, directly or indirectly. How does the client feel about risk? How complicated is their family in regard to estate planning? Whoever is playing the project manager role needs this contextual information to provide the best service,” Busoli says.
“The best leaders take charge with very clear communication and set well defined expectations, responsibilities and deliverables.”
Best practice collaboration
Busoli has been a specialist in SMSFs since 1995, with a particular focus on administration, compliance and strategy. Over the course of his career, he has seen a number of different approaches to collaboration between SMSF professionals, and believes a family office model is an effective structure to facilitate collaboration.
“Increasingly, I’ve seen financial planners calling in professionals from all sides in a family office model. In this model, all the different suppliers, planners, accountants, administrators, lawyers and other services have well established collaboration arrangements,” Busoli says.
However, for this model to be effective, the project manager needs to be a strong communicator who sets clear areas of responsibility, says Busoli.
The best leaders take charge with very clear communication and set well defined expectations, responsibilities and deliverables. Having this set out in writing is important to maintaining accountability between parties.”
It’s important to note Busoli does not recommend an in-house family office model as this can invite conflicts of interests associated with vertical integration, as well as lapses in service quality.
“Having all these services in-house may lead to accusations of vertical integration. It’s also harder to effectively deal with service inadequacies if a colleague isn’t up to scratch. A regular family office model avoids these problems,” Busoli says.
Documentation, communication and advice
Busoli believes an overemphasis on compliance is undermining the quality of advice provided to SMSF trustees, and argues many SMSF professionals view core documents, such as SOAs, primarily as exercises in compliance rather than communication.
“It’s partly due to regulators targeting compliance, but it seems that for many professionals, compliance is more important than results. Documents like statements of advice are rarely understood by trustees, and it’s because there’s such a focus on making sure all the I’s are dotted and the T’s are crossed. We’ve lost the ability to be clear in what we’re saying,” Busoli says.
When financial planners take on the role of project manager, they can bring their holistic view of a trustee’s personal situation into SMSF documentation. Busoli believes this allows key documents to not only be compliant with relevant regulations, but also clearly set out financial strategy in a digestible manner.
“All the key items of a trustee’s estate depend on documentation, and the planner has the necessary visibility to ensure they receive the diligence they deserve. It’s important that documentation is completed in this fashion and is worthwhile communication, not just a check box exercise.”