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01
Aug
14
Posted by:
Louise Drolz

‘I will speak out against wrongdoing and support others who do the same’


As a financial advisor I believe that, regardless of any statutory or common law requirements, in order to act in the best interests of my clients, I have an ethical responsibility to put their needs before my own.  However, lately this responsibility has been tested.

Recently I had a client who was going through a particularly acrimonious divorce.  The client (along with her spouse) is the trustee of a self-managed super fund with substantial assets. She told me she believed the other trustee, the SMSF’s accountant and auditor were colluding to her detriment and that the way the SMSF was being run was not compliant with the SIS Act. Because of this, not only was she unable to access her superannuation but she was also at risk of being penalised and losing a big slice of her retirement savings - through no fault of her own.  

Her brief to me was to investigate the fund and identify and quantify the cost of any possible breaches. I did this, and reported back.  

Our next step was to make the auditors, accountants and the other trustee (her spouse) aware of our concerns. We did this, but with no result other than denials and accusations of hysterical over-reaction.

After months of getting nowhere and with mounting concern about the status of the SMSF, she made the decision – against the advice of her lawyer and with full knowledge of the possible consequences – to ‘blow the whistle’ and report the fund to the ATO.

She asked me to help her present her concerns to the ATO and to assemble a file of evidence. Whilst extreme, this all seems relatively straight forward, until you consider the following issues. 

My client had a history of psychiatric disorders, including ADD, depression, anxiety disorder, panic attacks and bipolar disorder – as described by her, her spouse and a plethora of medical and non-medical professionals who had somehow become attached to the case.

So, my first consideration was whether she had the capacity to make sound decisions and understand the consequences of her actions.  I believed she did fully understand the consequences. I believed this because I’d discussed the possible outcomes in detail over many months. I’d even gone to the length of preparing a detailed written report quantifying the impact of a worst-case scenario.

I had rather cynically noted that any claims of a lack of capacity both on her part and by the various ‘interested parties’ was invariably made only when needed to provide a rationale for otherwise unacceptable behaviour. I’d also observed that, when required to defend her own interests, her cognitive abilities were razor sharp.

The other consideration was what would most likely happen if I refused to assist her. 
I felt that she would still make her disclosure to the ATO regardless of my support and that it would be done badly, meaning she would end up in even more of a mess if she did it without my assistance.

From my perspective, the real ethical dilemma was in considering exactly why she was doing it. Was she driven by a genuine concern about the likely financial consequences to her SMSF if she didn’t ‘dob in’ herself and the other trustee before the ATO discovered the breaches? Or was she driven by an even baser need to punish her spouse for years of perceived abuse? There was also the overlay that perhaps I had a duty to draw the authorities’ attention to what appeared to be unlawful acts.

In the end I did decide to help her and the cost to me in terms of time, money and stress has been substantial and ongoing. 

When I made my decision I knew this was a probable outcome. Over the months prior I’d had ample opportunity to observe both the bullying tactics of the other side and the capricious nature of my client. 

However, these consequences shouldn’t be, and weren’t, a consideration in the ultimate decision I made.

One of the principles of the Oath is, ‘I will speak out against wrongdoing and support others who do the same’ - there is no ‘unless it’s to my detriment’ addendum.

Louise Drolz - Principal, Remedy Financial

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