‘No reason’ for accountants’ exemption: final QAR report

Head of the Review, Michelle Levy, stated in the final report she would not be recommending any changes to the advice accountants and registered tax agents can give.

Ms Levy noted the feedback from associations in the SMSF and accounting space which had called for accountants to be able to provide advice more broadly about their clients’ superannuation needs, including whether to establish an SMSF without an AFS licence or without being an authorised representative.

While she noted that accountants play an important role assisting their clients with financial arrangements, this did not mean that they should be given an exemption from the framework that regulates the provision of financial advice.

“They have expertise in tax matters. Tax is a critically important aspect of superannuation, but the matters that are relevant to a decision to establish and maintain a SMSF and to rollover superannuation into a SMSF are much broader than those relating to tax,” Ms Levy explained.

“Advice on superannuation products, including interests in SMSFs, is financial product advice. It should be regulated as financial product advice. I do not see any reason for making an exception.

“This will ensure that consumers who receive this advice will do so with the same protections as all other recipients of financial product advice, including that the advice is good advice (if it is personal advice), the requirement for advice providers to act in their best interests (if a fee is charged for the advice) and access to AFCA. These are important protections which would not otherwise be available under the TAS Act or any other Act.”

Ms Levy also pointed out that SMSFs are not suitable for many consumers and should therefore not be established lightly.

“Advice to establish an SMSF should only be given in circumstances where it would be good advice to do so.”

“That said, I am not unsympathetic to the concerns raised about the costs associated with providing this advice. They are high. Much of this relates to matters outside my Terms of Reference, such as the education and training standards, professional indemnity insurance and the ASIC levy and will need to be considered separately.”

Ms Levy said the recommendations made in the report would make it easier for all advice providers, including accountants who are authorised by an AFS licences to provide personal advice to clients.

“It will also make it easier for them to provide limited or one-off advice,” she added.

Expanding intra-fund advice

The final report has also called for superannuation fund trustees to be able to provide personal advice to their members about their interests in the fund, including their transition to retirement.

“In doing so, trustees will be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the advice,” the report noted.

“Superannuation fund trustees should have the power to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.”

The report recommended that the Superannuation Industry Supervision Act be amended to expressly provide trustees with permission to apply fund resources for the purposes of providing personal advice to members about their superannuation and to remove section 99F.

New consent requirements for wholesale clients

In the report, Ms Levy expressed concern that the current consent arrangements for clients to be classified as wholesale clients were not working effectively.

“There is no requirement for a wholesale client under the assets and income threshold limb of the definition to have any of the qualities which make another person eligible to be a sophisticated investor.”

She also noted they are not required to be told about or to agree to the consequences of being treated as a wholesale client.

The report recommended that the Corporations Act be amended so that a client must consent to being treated as a wholesale client under the assets and income threshold.

“An accountant’s certificate would still be required. In order to give their consent the adviser should be required to explain the consequences of being a wholesale client to the client and the client should be required to sign a written acknowledgement before the financial service (including financial product advice) is provided,” explained Ms Levy.

“I have decided not to recommend an additional requirement that the adviser be satisfied about the client’s level of understanding and ‘sophistication’ because I am not convinced that an adviser could form that view objectively, particularly if for example the adviser is only authorised to provide advice to wholesale clients.”