Under the new code of conduct for financial advisers that commenced on July 1 it is compulsory to achieve 20 credits of professional development over a 12-month period. In attending the annual conference of the Institute of Financial Advisers (IFA) it is possible to receive up to 12 credits.
This year's conference was held in Wellington last week. It was to have been held in Christchurch but unfortunately for obvious reasons it could not.
There were many interesting and informative sessions at the conference with one of the most notable a presentation from a certain Mr Todd Blackadder about the Crusaders culture and how they keep it all together.
On a more serious note, the best presentation I attended was by Mr Denham Martin on trusts. Mr Martin is an Auckland-based barrister and solicitor. He specialises in tax and trust law.
He has written columns in the NZ Herald and presented an interesting seminar on trusts last year at the Dunedin Public Art gallery. The presentations while serious are delivered with a considerable amount of humour.
The strong message from Mr Martin was: if your trust is not operated correctly then it is not worth having. In particular, documentation that shows that it is operating correctly. Documentation concerning:
Are all trustees involved in decision-making?
Is an annual trust meeting held?
Is a minute book kept which records resolutions?
Are trust schedules maintained?
Are financial accounts prepared annually?
Are taxation responsibilities up to date?
Is a written investment strategy signed off?
Is there adequate insurance on the assets and is that cover regularly reviewed?
He commented on several cases in the public domain as to how Inland Revenue was looking at the operation of trusts where persons are operating their trusts in such a manner that they avoid tax.
Mr Martin made clear it was not just necessarily a paper trail that was required, but evidence that the trust was operating correctly. In other words, those actions that were recorded were actually happening.
He pointed out that many persons who were appointed as independent trustees did not know their responsibilities. Independent trustees assume just as much risk as other trustees. The potential liabilities are often not apparent until well into the future.
His recommendation was to have a trust company such as the Public Trust or Guardian Trust as an independent trustee, as they are truly independent and perpetual. The most dangerous for all trustees is to have family friends and/or acquaintances as an independent trustee.
Trustees are entrusted with the control of the assets in the trust. Their aim is to meet the goals of the settlers, the needs of the beneficiaries and exercise sound judgement in decision-making.
Most trustees never meet the beneficiaries, so know nothing about them. There is a need for more education on the duties of trustees. A good start is a booklet by Mark Maxwell (2007) Trusts a Kiwi Sham?
• Peter Smith is an authorised financial adviser and certified financial planner. He is the principal of Kepler Group Otago Ltd, Dunedin. A disclosure statement is available on request, free of charge. Email: pete@keplergroup.co.nz.
