As reported earlier this month, ASIC has sent letters to accountants with outstanding licensing applications advising it will make contact “in due course”. Licensing for Accountants chief executive Kath Bowler interpreted this as “don’t call us, we’ll call you.”
It is anticipated that hundreds of accountants may not be licensed to give SMSF advice before the new superannuation legislation is locked in, which is when Ms Bowler believes “the real issues” for accountants will set in.
Aside from the obvious lack of licensing provisions for those accountants looking to advise on the new legislation, newly licensed accountants will also be faced with the hurdles their industry counterparts are now starting to experience.
Significantly, Ms Bowler believes many accountants will find that they’re not comfortable with their chosen licensing route once they begin operation.
“I have often predicted that the home accountants end up in on the first of July, for lots of them won’t be the right home longer term,” he said.
“People are thinking the limited licence is one thing and it’s not. And they’re thinking the authorised representative option is one thing and it’s not. And everybody is still building and developing things that accountants need. Some will get it right, some won’t.
“For the authorised representative option, they’re trying to turn accountants into something they don’t want to be. For the limited licence option, the compliance obligations [and] the initial set up is perhaps greater than thought.”
A lot of accountants are also finding it confronting that they can’t simply “do what they always did”, Ms Bowler added.
“It’s becoming quite obvious how different the advice is going to look to what they currently do. They have to dig a bit deeper than they realise to meet all the best interests duty requirements that they might not have had to in the past,” Ms Bowler told SMSF Adviser.
“We’re struggling trying to help them strike the balance between when to just give simple pieces of advice and not go over the top with SOAs, versus providing a lot more in depth advice to your clients and how to do that.”
ASIC needs to connect the dots, get off its bum and conduct shadow shopper surveys ASAP. it’s clear to me from the low license take-up; media articles saying that accountants are ‘waiting and seeing”; and ‘structuring our practices’ comments like Ralph’s, that a huge amount of unlicensed and therefore illegal advice is bring provided to SMSFs by accountants post 1 July.
Many accountants seem to think that that they are technically and morally superior to planners and somehow above this kind of regulation, but rip-offs like the Guevara music streaming IPO fiasco (funded through thousands of accountants’ clients with huge kickbacks) shows that this is a nonsense.
This issue is an obvious test as to whether, after all the scandals, the corporate plod is still asleep at the wheel.
Thank you for insinuating that I am a criminal.
I find it ironic that most the scandals you refer to were committed by licensed financial planners yet you appear to only want accountants investigated.
Adam, you do realise that giving specific advice as to contributions limits, pensions, death benefits is considered tax advice and is still legal for non-registered accountants to give.
I disagree. You can provide factual information but not personalised advice to the client on such issues without actually doing the research and recommending within an SOA etc.
Idea being you actually do the research to ensure the advice is in the client’s best interest as opposed to pulling a figure out of a hat without considering the rest of their situation.
Reality, I can give personalised advice so long as it is tax advice. I can advise on salary sacrifice and contribution limits so long as I do not recommend the strategy from a financial benefits aspect. That is clearly set out in the regulations.
I do not need a SOA and certainly do not need to pay thousands of dollars a year to a financial planning firm who are only interested in tapping my client base.
So what are you really achieving by saying to the client “your concessional contributions cap is XXX for this financial year”… That’s solved in a quick google search.
The next client question being “Should we contribute more money to super?” of which you cannot answer.
Giving advice around pensions can also be very complicated once you consider potential Centrelink and Estate Planning consequences.
I achieve what the client wants. Clients want to know the actual tax consequences which I can tell them.
I don’t give them an exact answer to the consequences of contributing more to super, but neither do you. You have to estimate inflation, rates of returns, your fees and changes in investments based on past data that may have no relevance at all to actual future results. At best you give them an “educated guess” and bear no personal responsibility if your guesses are wrong.
And telling your clients the tax benefit of putting in a contribution on an annual basis and salary sacrificing can’t be seen as implied advice? Maybe take a closer look at some of the guidance given by CA and CPA Australia on this and at the very least make sure you have very clear general advice disclaimers in your information to clients.
No worries Ralph, keep telling clients exactly which fund to make their contributions too and why you recommend that fund compared to any another. Keep advising them to set up SMSF pensions as it is a financial product as defined by ASIC, write the pension minutes, advise of the reversionary beneficiary or not. And keep advising clients how and to whom to leave their SMSF death benefits (including the Life insurance that you haven’t bothered to advise on) as you illegally advise them to establish a SMSF.
Good luck Ralph, whilst ASIC probably won’t come knocking any time soon, eventually something will go wrong for a client and they will point the finger at your advise.
But hang Ralph, you don’t have an AFSL so your Accounting PI won’t cover you.
It’s a very slippery game plan Ralphy boy.
Thank you Adam.
Just to get a couple of things straight as you appear to have made a few baseless assumptions.
I do not tell them which fund to contribute to, the choice of fund is irrelevant from a tax perspective.
I don’t advise them who to leave their benefits to, that is their choice and I advise them to seek legal advice if it may get complicated.
I don’t advise them about which life insurance policy to take, but do suggest that it is something they should consider and recommend a broker to them.
I advise them of the tax implications of taking a pension, both for themselves and their accumulated benefits. I do not recommend that they do.
I understand what I can and cannot do and have no fear that ASIC will come calling. I know when to outsource work I am unable or not qualified to do.
I think you will find that the vast majority of accountants are the same. Unlike financial planners who can get qualified with a 6 week course, qualified accountants need a degree plus years of post grad study and experience. And with respect Adam, “slippery” is a term most widely used for real estate agents, used car salesman and financial planners.
That’s all well and good Ralph, but the issue isn’t necessarily what you have done or said but what your client thinks you have done and advised. If the proverbial hits the fan and they start looking at who was involved, who said what and when, clients and their legal representation will be looking your way. If you haven’t got a rock solid paper trail that distinguishes between ‘factual information’ and ‘advice’ then you will have a problem. Client’s don’t understand the difference between the two and given they go to you as their ‘trusted adviser’ they will see everything you say as advice.
You also need to be very careful to not be trapped by ‘arranging’ as defined under the Corps Act. This is the bit that many accountants seem to overlook and is what may prove to be your undoing, depending on the level of involvement you have in implementing the ‘factual information’ you have provided your clients.
Jimmy, I agree with your comments to a degree. I do not believe we have an issue with “arranging” , although it is something we have considered, in that we do not implement anything that is not related to taxation and business advice. Choice of plan, insurance, legal advice, wills and POA’s we refer to experts and do not implement.
There seems to be belief that all accountants who do not choose to be licensed are either negligent, ill informed or deliberately flouting the law. the truth may be that most have considered the new regulations and are structuring their business so that they comply by restricting the scope of the service they provide.
Ralph, my concern with your argument is that your opinion is effectively irrelevant. The issue is whether your client sees it as advice or factual information in hindsight. If they are looking at taking legal action against you as something has gone wrong I can guarantee they will see it as advice, even if at the time it wasn’t. You then need to prove that their interpretation is incorrect, which is largely impossible to achieve particularly if you are considered “a trusted adviser”. I have worked with three financial planning licensees who have all excluded the provision of “factual information” to existing clients as it is impossible to show conclusively that you have not influenced their decision making in previous discussions – whilst it can seem harsh at times it is also logical.
Tony’s question: “Since when was an SOA over the top when it came to advice.”
Answer: When you charge $3,000 for a 75 page SOA when the client just wanted a straight answer to a very simple question……..
Oh this is simply amazing…. ‘Wait you’re telling me I need to actually document and confirm that my advice is suitable for my client?!’
Maybe now they can stop complaining about financial planners.
“A lot of accountants are also finding it confronting that they can’t simple do what they always did,” Ms Bowler added.
Isn’t that the whole point SMSF Adviser and Kath Bowler?
Far too many non AFSL accountants were going way, way, way beyond the old accountants exemption of setting up or closing down an SMSF.
Bucket loads of SMSF accounting advice was being illegally done with zero AFSL compliance, no fact finds, no risk profiles, no file notes, no SoA’s, no formal reviews, etc.
That being a huge amount of accountants provided specific contributions, pensions, death benefit, etc strategic advice with ZERO AFSL compliance.
And now finally they have to play on the same AFSL legal compliance field they are becoming suprisingly aware of the massive amounts of AFSL compliance required.
“Just give simple pieces of advice and not go over the top with SOAs”. What a joke. Since when was an SOA over the top when it came to advice. All advice at some point starts with an SOA even little tinsy winsy pieces of advice. Welcome to the real world.