Advisers who offer standard template documents for SMSFs without asking clients for their preference may find themselves liable if the document doesn’t match the client’s instructions, warns an industry lawyer.
Cooper Grace Ward Lawyers partner Clinton Jackson said that when dealing with SMSF estate planning documents, advisers don’t always match up previous instructions given by clients with the outcome of what they’re doing now.
“For example, if a client with a reversionary pension to their spouse walks into your office and says they want to make a binding nomination to their children, then we need to ask whether earlier documents need to be revised because, if we don’t, that document may have a different outcome to what was intended,” Mr Jackson said speaking at a recent Cooper Grace Ward conference.
“The other thing that we find is that advisers tend to suggest template documents for things like trust deeds, for example. They have standard deeds that they typically like all their clients to use because it makes their life easier.”
However, if the client has told the adviser a specific wish about what they want to happen and who they want to control their fund, and the adviser has gone and given them a new deed because that’s the one they always use, that deed may not actually work for that client’s instructions and the adviser will be liable if the two documents don’t match up, he warned.
“You probably don’t ask your clients, ‘Would you like me to send you to a lawyer who’s going to draft you a specific deed that’ll cost you a bucket load’ or ‘I can get you this cheap one that I like using; it may not be perfect, but it’s what I normally use’,” Mr Jackson said.
“If the client tells you to go and get a cheap one, you’re off the hook, but if you do it without asking, then it’s your problem.”
Mr Jackson said that advisers also need to make sure they tell clients exactly what they’re advising on.
“Make sure that your scope of engagement is really clear, particularly if you’re not helping them with estate planning and succession issues; make sure that’s carved out in your management letter each year,” he said.