Houston, we have a problem – SMSFs, incapacity and Financial Advisers

  • Presentations, Technical Resource
  • Set up & management

National Conference 2023

The effect of the incapacity of trustees or members of an SMSF is not just an issue for the SMSF and their continuing compliance status. It is a major challenge and a growing area of risk for professional advisers more generally.
 
A developing area of law impacting the professional adviser sector is ‘capacity negligence’. Here advisers are being challenged and potentially held liable for not assessing their client’s capacity competently or not being attuned to the insidious presence of undue influence from other members of the family. This can lead to them effectively facilitating elder abuse.
 
Advisers may have had a client for many years without difficulties. However an ageing client can create issues where the adviser is ill skilled to identify the issues and appreciate and where they are confronted by an ethical challenge. They may even have to consider their duty or responsibility to ‘whistle blow’ where they may become aware of illicit actions by other parties such as family members in manipulating an SMSF particularly through the auspices of an EPOA.
 
We will briefly explore the law of incapacity and its effect on SMSF’s, financial advisers, accountants and ‘other professionals’ and then drill down to the dangers of acting as an adviser without knowledge of the law or wilful avoidance of it. We will examine some riveting examples and explore some overseas development such as in the US.

The contents of this resource are taken to be correct at the time of publication.

Disclaimer: Technical Papers contain general advice only and are prepared without taking into account particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to the individual circumstances of your client. While the SMSF Association believes that the information provided is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the Corporations Act 2001. © SMSF Association