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SOAs can have a limited scope in such a way that they include consolidation advice but they don’t include life insurance advice. If this was not possible, the entire Limited Licensee regime which commenced on 1 July 2016, would be unworkable.
If the client has agreed to limit the scope to superannuation only, then you can recommend consolidation of the superannuation funds, if you think that’s the best option for the client, after conducting a reasonable investigation into alternatives. However, when recommending consolidation, this is “replacement of product” advice so you need to (amongst other things) warn the client about benefits lost, and significant consequences of acting on the advice. You should provide a clear warning in the SOA that the client should not act on your advice (ie. Should not consolidate or shut down any superannuation fund) until they have sought advice about the existing life insurance in the existing funds, from a properly authorised adviser. You could even tell them that closing a fund means that they will lose any existing life insurance in that fund, and it may be difficult to obtain new life insurance on similar terms (this is a statement of fact).
On a side note, if you are a representative of a Limited Licensee, you can only give consolidation advice if you are also considering recommending that the person set up an SMSF as part of that advice (you may decide that an SMSF is not appropriate and that consolidating into an existing public offer fund is better, after conducting the research).
Also, if you’re a limited licensee, we have a support service, offered in conjunction with our partners at http://www.L4a.com.au. You should check out their website. If you’re a full licensee, we have SOA templates and other relevant services that may interest you at http://www.hnlaw.com.au.
Author: Paul Derham (Partner)
Co-contributor: Hugo Sasse (Law Clerk)