The “one-size-fits-all” approach to financial advice has failed and requires urgent reform to simplify the regulations and make it less expensive, says CA ANZ.
Its members are unable to offer the superannuation advice demanded by clients and the answer has be opening the system with more efficient rules, the professional body says in its submission to the Quality of Advice Review.
“The resounding message from our members is that their clients want simple, strategic superannuation advice from their trusted adviser – their accountant,” said CA ANZ advocacy lead Simon Grant.
“We believe there is, and will continue to be, a need for trusted advisers to look after the financial advice needs of everyday Australians.
“It is high time reforms are implemented to ensure advice is less expensive to provide so it is more accessible to all consumers. Advice on simple matters or complex scenarios needs to be able to be provided by suitably qualified professionals in an efficient manner.”
The terms of the QAR, released in March, were criticised by tax and super professionals for not going far enough although lawyer Michelle Levy, who leads the review, said it was a chance to make “it easier for Australians to receive quality advice when they need it and in a form they want”.
As well as its own submission, CA ANZ has joined forces with IPA and SMSFA in a joint document relating specifically to accountants outlining four key areas of advice sought by clients in the ordinary course of dealing with tax agents.
That joint submission has yet to be released along with details of a unified approach by 10 other industry associations “working for the resolution of key issues facing the industry as a whole”.
However, the CA ANZ submission sets out its reasons for reform and offers 10 reasons why chartered accountants “are well placed to reduce the advice gap”.
- Additional financial advice in the community helps individuals and small businesses on the road to recovery
- Small businesses employ people, so if we can help small businesses, we help people get jobs.
- Many Australians have accessed their super in record amounts during COVID and broadened access to advice will help them restore their super balances.
- Helping add to the superannuation pool will see more Australians self-reliant in retirement.
- Accountants are accessible across Australia.
- Our proposed superannuation strategic advice measures as part of a tax agent service are consumer centric.
- A vibrant financial services sector leads to more jobs as many advice providers are also small businesses.
- Post the Hayne Royal Commission, trust in the financial services sector needs to be restored – accountants are ideally placed to do this.
- Recognising CA qualifications will keep more accountants in the industry thus stemming the tide of many highly qualified professional advisers who are leaving.
- Post the Hayne Royal Commission, advice must be independent and in the clients’ interest. That is how accountants operate.
Mr Grant said professional advisers giving comprehensive financial advice could exist alongside a “cohort of professional business advisers” – accountants – offering simple, strategic superannuation advice.
“This should occur in the ordinary course of providing a tax agent service, however, at present it can’t be, due to licensing requirements,” he said.
Simplifying the rules could remove the need for suitably qualified accountants – who are or have recently been on the financial advice register or who are SMSF specialists – to hold an AFSL.
“With our proposed model, consumer protections are strong, as a qualified accountant who is also a registered tax agent is subject to rigorous and consumer-oriented ethical standards.
“CAs are well-placed to satisfy the advice needs of businesses and individuals in a professional and ethical manner.
“A simple way to bridge the advice gap is to keep highly qualified, professional accountants in the industry by recognising their qualifications in full.”
A lot of what we do with super is basic tax advice. Choosing a fund and underlying investments is clearly fin planning. SMSF compliance needs a super specialist. But should we need any more than relevant training to suggest putting $27.5k into an existing super at year end?
Even financial planners needs some help to provide simple affordable advice. The 7 Safe Harbour Steps is a framework (check-a-box) provision that can demonstrate compliance with the best interests duty – the fundamental objective of Chapter 7. The 7th step is the problem to anyone giving simple, limited or episodic advice as it requires you to imagine every possible outcome for a client and address it. (Or at least that is how the legal opinion has interpreted it).
Unless Step 7 is removed or reworded, nothing is going to get easier for any of us. Stephen Jones has already indicated that he believes the Safe Harbour Steps save us from ourselves, so the argument needs some real prosecution if it is to ever get raised as a bill.
As to recommending a pension, ASIC considers that every pension commencement recommendation requires a cashflow to be prepared. Providing a cashflow analysis for some clients makes perfect sense but there are also clients that don’t want, or need it, to be done – eg clients that are looking to drive returns by managing tax.
Having a one in all in for pension commencement advice drives up the time to provide and therefore the cost and, if the client doesn’t value it, why does it need doing? Should we be providing advice to the client in front of us or, the strawman that ASIC envisages?
The Code of Ethics should be the torch out of this dark hole but it requires advisers to believe that they can be trusted to exercise appropriate professional judgement. Having nanny state provisions such as the Safe Harbour Steps removes confidence but worse, leads to poorer client outcomes as they receive a document that is compliant (internally facing) but virtually unreadable – definitely not client facing.
Even financial planners needs some help to provide simple affordable advice. The 7 Safe Harbour Steps is a framework (check-a-box) provision that can demonstrate compliance with the best interests duty – the fundamental objective of Chapter 7. The 7th step is the problem to anyone giving simple, limited or episodic advice as it requires you to imagine every possible outcome for a client and address it. (Or at least that is how the legal opinion has interpreted it).
Unless Step 7 is removed or reworded, nothing is going to get easier for any of us. Stephen Jones has already indicated that he believes the Safe Harbour Steps save us from ourselves, so the argument needs some real prosecution if it is to ever get raised as a bill.
As to recommending a pension, ASIC considers that every pension commencement recommendation requires a cashflow to be prepared. Providing a cashflow analysis for some clients makes perfect sense but there are also clients that don’t want, or need it, to be done – eg clients that are looking to drive returns by managing tax.
Having a one in all in for pension commencement advice drives up the time to provide and therefore the cost and, if the client doesn’t value it, why does it need doing? Should we be providing advice to the client in front of us or, the strawman that ASIC envisages?
The Code of Ethics should be the torch out of this dark hole but it requires advisers to believe that they can be trusted to exercise appropriate professional judgement. Having nanny state provisions such as the Safe Harbour Steps removes confidence but worse, leads to poorer client outcomes as they receive a document that is compliant (internally facing) but virtually unreadable – definitely not client facing.
Actually, Accountants can give fair and reasonable advice based on the entire financial position of a client in respect of their super. We did this for many years before the reforms changed this (2016). Now, the advice is largely unattainable for many clients, as most financial planners cannot provide the tax advice of accountants. As a chartered accountant, we have been subject to education standards and a clear ethical framework from the start…that is all new to financial planners.
Tell me where I can find a financial planner willing to provide advice on a pension commencement in a SMSF? No one wants to touch it without doing the complete financial planning for the client. And the client doesn’t want that. They ask questions about starting a pension, get the facts about it from the accountant but accountant, make up their own mind about starting a pension, but the accountant can’t set it up without providing a soa as we are worried about perceived advice and if not licensed where do they go? I have been providing the administration and compliance for SMSFs for over 20 years. I got my license but for 5 years could not recover fees and ASIC wanted to increase fees. I’ve asked FPs if they will take on the pension advice and they won’t and if they do it’s for $3k plus which the client cannot see the value in as they want to do it anyway. 6 years down the track and all its done is leave a gap for the small guys that don’t want a FP. Pre 1 July 2016 as an accountant I never provided recommendations, just information. Answered the questions from my clients and they made their own choice. Many trustees understand these things just need someone to fill in their understanding of how it works.
No I don’t think it’s fair that the accountants feel like in our step in and provide financial planning advice without having the right qualifications or Holden FSO and also then be under the education and legislative requirements that a financial planner must adhere to. Both the accounting professions being the CPI in the chart of accounts were heavily involved in relation to the owners legislation of consenting and the consent form process and now they feel that they don’t have to be bound by this and can give advice without being under the same legislation that a financial planner is I don’t feel that that’s fair at all. Either you’re an account or your financial planner you can’t be both is there is a conflict of interest