29/03/2018

Financial advisers shouldn’t fall for the illusions spun by document-provider salespeople.

One of Aesop’s fables is about a crow who was enjoying eating a juicy bone.  He carried the bone over to the edge of the pond and looked down.  In the reflection he saw an even bigger bone so he dropped the one he was eating and tried to grab the bigger one.  Alas, the bone he dropped sank to the bottom of the pond and he realised the bigger bone he’d tried to grab was an illusion.

Fast forward to the 21^st Century.  The crow is an accountant and financial adviser.  He is a member of SUPERCentral and all his clients SMSF deeds are on the SUPERCentral automatic update system.  He gets first class service from SUPERCentral whenever he needs anything and even has access to a library of over 150 lawyer-prepared, regularly-updated toolkit compliance documents ABSOLUTELY FREE.

He then gets sold a bone.  The salesman tells him that he can arrange for service by a much better firm that will give the crow everything that SUPERCentral does and more and better … and even betterer as well!

The crow is very busy with his accounting and financial advisory practice and doesn’t bother to check what the salesman says.  He rings SUPERCentral and cancels his memberships and moves his funds to the new firm.  Shortly after, he realises his mistake. The promises made by the new firm were an illusion.

The new firm can’t update his client’s funds automatically with no signature needed (only SUPERCentral has the patent to do that) so now he must have all his trustees sign the documents.  He is forever chasing clients to make sure they’ve done it.  And in the meantime he has some of his funds on one version of a deed and some on another version. The ‘set and forget’ service offered by SUPERCentral has been lost.

But that’s not all.  SUPERCentral is supported by Townsends Lawyers so the crow would have been able to access the PI cover of the law firm should there be some issue with the documents.  By not reading the new firm’s conditions he missed the fact that the new firm disclaims all liability both for themselves and their lawyers which makes the crow primarily liable to his clients – a liability that is outside his PI cover because the preparation of legal documents is not part of an accountant’s (or crow’s) normal work and the insurance company won’t cover it.

Poor service levels, hastily-prepared sub-standard documents, access to only inexperienced staff for help … all make matters worse.

The moral of this story? If you’re offered a bigger bone check it out really carefully …. it’s likely an illusion!

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.