Advisers using online trust deeds of variation services for their self-managed superannuation fund (SMSF) clients face the risk of not being covered by their professional indemnity insurance if a problem arises with a fund subsequent to the amendment.
Online deed variation services allow advisers to input relevant client data into the service provider’s web-based service and then subsequently produce the necessary SMSF documents.
“The superannuation deeds of variation service enables the adviser to make all decisions regarding how to comply with the variation clause, what parties need to be bound by the deed and otherwise amend the documents as they see fit. The documentation is effectively prepared by the adviser and the adviser is therefore responsible for the documentation,” DBA Butler director Daniel Butler said.
The problem for advisers is the use of these services may be construed as undertaking legal work for reward. If so, the adviser would be considered in breach of the law unless they had a current legal practicing certificate.
In addition an adviser’s professional indemnity cover may be compromised as a result of performing this legal work.
“Most professional indemnity insurance for advisers, other than lawyers, excludes cover for services that a lawyer must undertake,” Butler said.
“Therefore, when an accountant, financial planner or consultant provides, for example, an superannuation deed of variation that constitutes legal work, they may void their professional indemnity insurance cover and find themselves exposed to beneficiary claims without the benefit of insurance,” he warned.
According to Butler professional bodies such as the Institute of Chartered Accountants in Australia, CPA Australia, and the FPA have recognised the problem and have attempted to address it.
To this end each body has included clauses in their Professional Codes of Conduct and Constitutions to prohibit their members from this type of activity.
