The Rollover Deadline and the Conflicted Referral
Priya, a licensed adviser, meets Marcus, 58, who holds $610,000 in an employer superannuation-style plan. Marcus wants to roll the balance into a self-managed structure recommended by his brother-in-law, a real estate developer who would hold a 30% stake in a commercial property the fund would buy. Marcus signs an authority for Priya to act, but the disclosure statement he received lists the developer as a referrer paying Priya's firm a $9,000 marketing fee. Marcus says he 'just wants it done before the tax year closes in nine days.' Priya has not yet obtained the property valuation, and the plan's exit paperwork warns that processing takes up to 20 business days. Marcus is on medication for high blood pressure and mentions he 'doesn't really read the long documents.'
1. Identify the conflicts and disclosure obligations Priya faces, and state what she must do before accepting the engagement.
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Two conflicts exist. First, the $9,000 marketing fee paid by the developer creates a soft-dollar conflict: Priya's firm benefits from a recommendation that may not serve Marcus. Second, the developer's 30% stake and family relationship mean the property is not an arm's-length investment; concentration and related-party dealing must be assessed on its merits, not on the referral.
Priya must give a conflict-of-interest disclosure that is specific and prominent, not buried in a general statement. She should confirm the fee is disclosed in dollar terms, explain how it is calculated and when it is paid, and record Marcus's acknowledgment. She must also confirm her licensing covers the advice and the product, and that she has a reasonable basis for the recommendation.
Because the authority is signed, she is now on the clock. She should document the scope of advice in writing, note that the rollover cannot be guaranteed before year-end, and obtain written instructions before acting. If Marcus declines to wait for the valuation, she should record his instruction and her warning, and consider whether proceeding without a valuation is in his best interests.
2. Marcus insists on proceeding immediately. How should Priya respond, and what records must she keep?
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Priya should not let urgency override the process. She should explain in plain language that the nine-day deadline is unachievable given the 20-business-day processing window, so any promise of a year-end rollover would be false. She should quantify the actual cost of delay if she can, and separate the tax-timing question from the investment-merit question.
If Marcus still wants to proceed, Priya should offer a staged approach: complete the advice and suitability assessment now, lodge the rollover request, and defer the property purchase until the valuation and related-party review are complete. She should obtain a signed acknowledgment that he understands the timing risk and the concentration risk.
Her file should contain: the fee disclosure and acknowledgment; the scope-of-advice document; notes of the conversation about the deadline, including his statements about not reading documents; the valuation once obtained; the related-party analysis; and her reasoning for any recommendation. She should also record his health disclosure only to the extent it affects risk capacity, and avoid unnecessary medical detail. If he refuses to wait and the advice cannot be given responsibly, she should decline to act and document why.