The software provider’s managing director, Ron Lesh, told SMSF Adviser that Chartered Accountants Australia and New Zealand and CPA Australia had been wrong in their submissions to Treasury that returning the exemption would not be enough to address unmet advice needs among SMSF trustees.
“What they should have done is said we support what’s being proposed and we would also like to see the following, but instead they have said we don’t support it at all,” Mr Lesh said.
“They haven’t asked members, and that is what I see is the problem; ask any member in a small firm whether the exemption should come back and the answer would have been yes.
“It’s not going to solve the whole problem, but it’s certainly an improvement on what we’ve got — you’ve got to start somewhere.”
Mr Lesh said the willingness of Treasury and regulators to consider a return of the exemption indicated an industry-wide acceptance that the current regime wasn’t functioning as it should, and that further steps should also be taken to improve quality and access to SMSF advice.
“Every time ASIC does its shadow-shopping, it finds SMSF advice is crap, and accountants agree it is not working,” he said.
“ASIC has not come out and jumped up and down and said [returning the exemption] is a bad idea, and they would have if they didn’t think it was, so their view is clearly that SMSF advice isn’t working.
“The way I look at it is the first stage is getting the exemption back and allowing accountants to talk about what they should be talking about, and once we’ve done that, we need to get trustees better investment advice.”
Mr Lesh said in addition to reinstating the exemption, the SOA process needed an overhaul to make investment advice affordable and appealing for SMSF trustees, given that 80 per cent of self-managed funds currently did not use a financial planner.
“The research we’ve done about that is that the whole SOA process, having to produce a 40-page document and pay $3,000 or $4,000, is ridiculous — it should be a two-page document,” he said.
“We have to come up with a short form SOA that can be used not just for SMSFs but generally.”
Mr Lesh added that rather than sitting under the ASIC licensing regime, the government should consider developing a separate SMSF adviser profession with its own training requirements, regulated by the TPB.
BGL is supporting a return of the accountants’ exemption through encouraging its users to sign a petition started by the Institute of Public Accountants which Mr Lesh said now had around 1,000 signatures.
We used to have a system that provided defined benefits to members and even defined pensions for the lucky few. So a member with a reasonable period of employment throughout their lifetime could be expected to retire on around 75% of their final salary. But that was not good enough so we moved to a system where the member now bears all the risks with an unknown outcome in retirement. These changes were primarily implemented throughout the 80’s and 90’s with an agenda driven by tax and not retirement. The resulting system is now a product of these changes.
Why should an employer face ALL the risk of providing for your retirement ? As that is what a defined benefit pension does, transfers the risk to the employer of Investment returns and retirees longevity.
Please explain why you think an employer should carry all that risk when a person is long retired from working for that employer or a bunch of employers ?
If you want a defined pension the go buy an annuity yourself please.
Like lots of people in the world unfortunately too many people don’t want to take responsibility for their own choices and decisions in their own life. Grow up i’d say.
The current regulatory system has turned simple advice into a complicated [b]overwhelming [/b]system…. the only people that are really suffering are consumers, as now only the wealthy can afford financial advice… due to the regulatory requirements of providing simple advice.
“The research we’ve done about that is that the whole SOA process, having to produce a 40-page document and pay $3,000 or $4,000, is ridiculous — it should be a two-page document,” he said.
The above comment has nothing to do with the accountants exemption, it has to do with the financial planning process which must be followed if people are to give advice in this area which is well out of alignment with common sense and what clients want.
Accountants need to follow the law and stop whinging about this fact and ASIC should start getting rid of accountants who provide unlicensed advice rather than ignoring it like they currently do. If this means that accountants support efficiency improvements in the provision of financial advice in Australia (which realistically an SMSF is because they all invest in something) then that is a positive.
My Accounting Body did not attempt to ask for my opinion. Start with returning the Accountants Exemption. Then, we need to clarify the scope of what is really needed for SMSF, and plan accordingly.
Let’s have a show of hands from the Accountants that previously overstepped the mark with extremely limited old rules that was allowed by [b]”the accountants’ exemption only permitted the recommendation to establish or wind up an interest in an SMSF”.[/b]
The majority of Accountants thought and acted or just completely disregarded the limits of the Old Exemption as if they were allowed to give as much SMSF AFSL advice as they wanted with ZERO AFSL compliance. Illegal AFSL SMSF Accounting Advice such as :
– Binding death benefit nomination advice whilst signing up SMSF deeds
– Specific contributions advice to the SMSF (loads of it)
– Rollover advice from existing super to SMSF (that often meant the loss of valuable Life Insurances in Super)
– SMSF Pension advice (by the truck loads)
&
– Some accountants even stepped into the Investment Advice of SMSF’s but that seemed to be far less than the strategic advice as above.
So let’s be honest Accountants.
1) Did you really understand how extremely limited the old exemption was. And if you did understand it did you overstep the advice you could provide ? or
2) Did you think it gave you cart blanche to as much SMSF advice as you wanted to provide with ZERO AFSL compliance ?
[b]Either way it was a massively abused exemption. [/b]
Accountants should be thinking themselves lucky that ASIC has been completely asleep at the wheel and never once busted 1 single accountant for all the masses of illegal zero AFSL SMSF advice.
Yet it seems Ron and most accountants want to return to this Illegal structure.
Ron is correct in that overall AFSL advice is soooooooooooooooo over regulated it is far too expensive and at every turn ASIC want more regulation, more red tape, more BS for the sake of BS.
[quote=Licensee Management](1) short form SoA’s exist; non pertinent and non customer specific information can be included via reference to an appendix and even hyper linked (2) accountant SMSF advice was more often poor than that provided by a financial adviser.[/quote]
That is rubbish. Under the current regime the “advice process” is really just all about compiling a file to defend the adviser if there is a court case. Compliance specialists all say that the “model SOA” from ASIC would not hold up against an AFCA complaint.
Both everything and nothing hold up against AFCA; they have no framework or guiding principles and don’t understand fiduciary duty let alone the legislation. What outcome you get at AFCA is dependent entirely on the day of the week and who touches the case; IE the only way to model your outcomes is using a Monte Carlo simulation.
So what “Licensee Management” is saying is that the whole financial planning / advice process is broken. In other words rather than just saying the accounting exemption needs to come back they are saying the whole thing needs to be redone — which won’t happen because ASIC and the politicians don’t understand the real issues..
The return of the accounting exemption is the same as me eating a salad prior to eating 4 donuts and expecting to lose weight — it achieves nothing in the overall scheme of things.
You are required by law to be licensed in this area to give advice and if you choose to give advice without being licensed then you should be stopped by ASIC / ATO because you are breaking the law. However I also can understand why accountants are giving advice on an unlicensed and illegal basis as it is much harder for ASIC to take action in this case.
Clients are suffering without the Accountants exemption allowed…Bring back the experience and knowledge Accountants have…
I have always found Ron Lesh to have common sense. No wonder he is a very successful business man. The accounting bodies did not ask their members what that wanted – probably because they knew they would have to do a 180 degree turn on their current stance.
Dear Adam, why the harsh comment? BGL provides software and will exist whether or not the exemption and other ideas are taken up. Why look on the dark side? Why not say he has some ideas which have merit?
It’s a nonsense to say a self managed superfund is self managed. Perhaps the investment strategy is, and good luck with that.
Where it is highly unlikely to be self-managed is:
Establishment – including the best trustee structuring for the individuals involved
What contributions are permitted
What investments are permitted
When/what can be drawn from super
Succession planning
Super is super complicated and for all those DIYers, perhaps you may consider, there just may be a knowledge gap.
If accountants want this gig back, are they going to be prepared to understand the whole of balance sheet and undertake cashflow modelling before making contribution recommendation? Are they going to partner with an insurance specialist to get that piece dialed in if necessary?
Not likely. It will be more of the same pretty ordinary that was before.
Strongly agree with this article – I am an SMSF practitioner.
(1) short form SoA’s exist; non pertinent and non customer specific information can be included via reference to an appendix and even hyper linked (2) accountant SMSF advice was more often poor than that provided by a financial adviser.
The accountants exemption needs to be reinstated – nobody “knows” the client more than their accountant.
We don’t need another adviser category – what we need is the regulators to stop telling us what we need. They are self manged funds after all.
Sorry John. As an accountant we know nothing of the client compared to what the advisors have to collect. Proven in our office of 52 accountants every week – we just don’t ask enough of the right questions
The accounting bodies don’t speak for me. I agree that the accountants exemption should be returned
Predictable comments from someone with a very significant vested interest.