Heffron managing director Meg Heffron told SMSF Adviser the Tax Office’s current diversification review had brought to light a key problem with the limited licensing regime, being that SMSF trustees were unfairly siloed from receiving simple advice on their fund from their accountants when they may not be willing to pay for full personal advice.
“I am a strong advocate for advice because I wouldn’t want my retirement savings invested on a whim by me, but at the same time, we are all adults and if I don’t want an adviser to look after my own money for my retirement, why should I have to have one?” Ms Heffron said.
“Under the current system, it’s hard to get narrowly focused advice, like ‘just tell me what to do about this strategic issue within my SMSF’. The best place for [clients] to start is accountants because they are used to handling all the tax rules, so it seems odd that we’ve singled SMSFs out and said you can’t give structural advice around an SMSF.”
With a recent Treasury review of the Tax Practitioners Board floating the possibility of reintroducing the accountants’ exemption, Ms Heffron said it was clear regulators had not yet got the balance right when it came to the SMSF advice ecosystem.
“I think accountants are still struggling with the fact they legally have to be licensed for something they have done without a licence for many years,” she said.
“They misunderstood or didn’t want to hear that the accountants’ exemption was really narrow so drifted outside that frequently, and limited licensing brought the issue to a head and made it hard to pretend you didn’t know you needed to be licensed to give all sorts of advice.
“But at this stage nothing’s worked — no licensing didn’t work, the exemption didn’t work, limited licensing didn’t work, full licensing would be stupid, so I don’t know what the solution is.”
However, Ms Heffron added that the ATO’s moves to investigate undiversified funds was unlikely to seriously affect trustees who had a proper understanding of their regulatory obligations, whether or not they were advised.
“The ATO has a lot of data and they must be surprised that 3 per cent of SMSFs have so much money in one asset class and wonder if they’ve thought about it,” she said.
“Within that group, there is going to be a subset that have been mis-sold something, and if the way you help those people understand they’ve been mis-sold is they get a letter asking if they’ve considered diversification, it’s not that harmful.
“Where it would be different is if the ATO starts imposing penalties on people because their reasons aren’t good enough, if it starts to cross the line between a helping hand and imposing their worldview on investors who don’t have to subscribe to that view that diversification is a must-have.”
ASIC Reg 7.1.33A regarding asset allocation and investment strategy states that an accountant does not require an AFSL to [i]”provide a recommendation or statement of opinion on how your client should distribute their available funds among different categories of investments. You may not advise your client to make particular investments through the SMSF.”
[/i]Clearly, we are therefore able to assist with drafting a broad investment strategy covering all the compliance requirements surrounding insurance, liquidity, diversity etc and which sets out a proposed mix among asset categories, so long as we don’t advise which particular products to acquire within those categories. We can also advise whether a proposed investment is eligible for an SMSF as this is merely compliance advice, and also whether a client-prepared strategy meets compliance requirements.
Don’t understand why the above article, and various forum commenters, indicate otherwise??
Absolute rubbish. It’s easy to give advice, get licensed. If the person doesn’t want to pay for it they don’t get the advice – it’s no different from any other transaction. If you as the adviser / professional / accountant don’t want to follow the rules as established by the government don’t take people’s money.
I will however state that no one (whether a financial planner or accountant) can realistically give scoped advice with this being linked to ASIC’s interpretation of reality and not the real world and that no one wants to receive an 80 page SOA but ASIC incorrectly think that this makes it more safe for consumers.
Until that changes its a level playing field and accountants can stop having a whinge and actually follow the law for a change.
common sense is forever absent when political decisions are made by people who don’t understand the problem
This dilemma for Accountants only arose because the Government, in their sometimes suspect wisdom, determined that an SMSF was an investment product. We will never understand why.
Clearly, an SMSF is an operating entity in the form of a trust under trust law, which may hold investment products. It is NOT an investment product per se. Therein lies the problem.
Rather than lobby for a return of the Accountants’ Exemption, why not just get the Government to alter their decree that an SMSF is an investment product. Surely that would overcome a lot of the pain for Accountants’ giving advice to SMSF trustees.
Peter, I heard this argument before. Where does it state that an SMSF is a financial product.
(BTW I agree with your statements)