An adviser, anonymised as “Mr C”, that recommended a client make a superannuation non-concessional contribution more than $100,000 above their non-concessional cap, has received a written reprimand from the Financial Services and Credit Panel (FSCP).
“The relevant provider gave advice in January 2023 recommending a client make a superannuation non-concessional contribution of $329,000 in the 2022–2023 financial year when the client’s non-concessional cap for that year was $220,000,” the FSCP said.
“When giving the advice, the relevant provider failed to obtain or take into account the client’s superannuation assets in the client’s PSS pension fund. As a result, the client needed to withdraw $120,735 from their superannuation and pay tax on the associated earning of $13,570.”
The sitting panel determined that it “believed that the relevant provider contravened sections 961B(1), 961G and 921E(3) [of the Corporations Act] specifically they did not demonstrate compliance with Code of Ethics’ value of diligence and Standard 5”.
Standard 5 of the Code of Ethics details that all advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client’s individual circumstances. You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.
Other than taking no action, a written reprimand is the lowest level of action available to the FSCP.
The reprimand will not be published on the Financial Advisers Register; however it is provided to the adviser’s Australian Financial Services licensee.
The announcement follows the FSCP reprimanding another adviser for failing to ensure their client understood their CGT liability.
According to the FSCP, the relevant provider gave advice to a client in March 2022 that included a recommendation to make a tax-deductible contribution to superannuation to reduce the tax liability from expected capital gains from the planned sale of an investment property.
“The relevant provider was advised of the sale of the property in July 2022 and in August 2022, the relevant provider confirmed the contribution could be made,” it said.
“However, the contract of sale for the property was signed in the 2021–22 financial year and the client did not have taxable income in the 2022–23 financial year to get the benefit of the tax deduction.
“The relevant provider did not explain to the client that the capital gains tax (CGT) liability arises when the contract of sale is signed or take steps to confirm when the contract was signed before implementing the advice.”
I can’t wait for all these “helpful nudges” to commence from back packers..
Maybe the FSCP should lobby the Government to provide access to the clients MyGov account. Why penalise us if we get it wrong, but make it harder than it needs to be to be able to confirm the right information?
Great work FSCP. The value for money has been exceptional.
Are we seriously going to start reprimanding advisers for every error. If there are ongoing repeated errors then this is understandable but everybody makes an error from time to time. Surely is how you then deal with the error that is more important.
These are avoidable errors that only idiots and rookies make. Absolutely no reason they should have been made if the advisers were professional and adhered to KYC and asked simple questions of the client or their accountant. Blows my mind people try to defend this cowboy rubbish.
Can’t wait for the litany of errors that the super funds ‘qualified advisers’ will make in this area. Does this adviser mistake / incompetence not clearly demonstrate that there is no such thing as ‘simple advice’ when it comes to Superannuation advice, or any financial advice for that matter. Those thinking Royal Commission 1.0 was bad, won’t like the findings in Royal Commission 2.0 if we let ‘unqualified advisers’ loose on millions of ordinary Australians that overall sadly have very low financial literacy levels…. the blind leading blind. What could possible go wrong.
Of course, if the Professional financial adviser could ACCESS the client’s MyGov account like Professional Accountants can, then this NCC situation would be far less of an issue.
You nailed it
Well said.
Perhaps so. How about asking the client to access it, then onforward that information to the advisor?
Except not every client wants to have a MyGov account linked to the ATO so it then them/us going to their accountant and the accountant actually providing the information requested.
Yes, but why have barriers that make our work harder?