A SMSF client wants an adviser to set up a SMSF, with the intention of investing in shipping containers for lease to unrelated persons.
The adviser contacted us before he drafted his SOA, stressing he had not recommended this strategy. (Just as bloody well! J) And asking us what he should do. Our response is shown here:
Hi Name Changed Please prepare your advice as indicated. I believe that you have a duty of care to your client to:
- make it clear that you do not recommend this as an investment and that you will not be responsible in any way for any losses on this strategy;
- not abandon your client just because they do not follow your advice;
- generally make sure the SMSF is otherwise set up and run properly; and
- constantly recommend in writing that your clients change their investment strategy and exit shipping containers as an investment as soon as possible.
BTW, shipping containers are not a financial product and are not covered by our AFSL licence. Could you please send the draft SOA to me for discussion and settlement before it is finally sent to the client? Regards Terry McMaster Responsible Manager and Director
Sometimes your clients will reject your advice. That’s OK. They are adults and they are responsible for their own decisions. You are not your client’s nanny, or loss underwriter. You don’t help your client by abandoning them just because they reject your advice. But, obviously, common sense and good practice means you should heavily document your advice, and its rejection, while at the same time doing all you can to help your client with the strategy they have embarked on. The heavy documentation starts with an appropriately worded SOA. Be very clear: “I recommend you do not invest in shipping containers because…” is almost a mandatory opening sentence. Then repeat this warning in writing regularly over time. Create a paper trail to make it indisputable that you repeatedly said “don’t do it”, and just because you helped them afterwards with their SMSF does not mean you changed your mind or otherwise thought the investment was a good idea. And no, we will not be adding shipping containers to our APL any time soon.