Speaking in a recent webinar, DBA Lawyers special counsel Bryce Figot explained that since the 2013 financial year, SMSF trustees have been required to regularly review and formulate an investment strategy that gives regard to all the circumstances of the fund, in line with regulation 4.09.
The explanatory statement that accompanied the change states that trustees should regularly review the entity’s investment strategy, by taking into account factors such as the changing circumstances of their fund and its members.
Trustees may evidence this requirement by documenting decisions in the minutes of trustee meetings that are held during the income year, it states.
Mr Figot said the review that needs to be undertaken under this requirement also needs to consider insurance.
For SMSF practitioners operating outside the AFSL regime and using templates with clients to fulfil this requirement, there are some dangers to be aware of, Mr Figot explained, especially as SMSFs don’t always tend to hold insurance cover.
“If the template states that ‘Yes, I’ve considered the investment strategy, its all fine’ and you’ve given that to your clients, what happens if the client gets injured or dies?” he questioned.
“If they haven’t been properly been considering things like the need for insurance, which is now an item that must be considered, then you may potentially wear the liability.”
SMSF practitioners therefore need to be very careful, he said, especially where it involves insurance and they’re not operating under the AFSL regime.
“If you’re not advising on things like insurance, then make sure that you’ve disclaimed your position carefully to explain that you’re not advising on this,” he cautioned.