William Buck managing director Lindsay Holloway told SMSF Adviser that with the accountant’s exemption ending mid next year, accountants will be required to complete a statement of advice along with other complex processes when undertaking certain services for clients such as setting up a SMSF.
Clients he said will inevitably have to wear the cost of that.
Mr Holloway said accountants will have to do a needs analysis for clients when determining whether or not they should have an SMSF, a service that tends to cost around $1,500.
He said that for many of the smaller accounting businesses it will also mean their clients are dealing with multiple people for affairs, which could have been dealt with by the one firm.
“People are cost-conscious and this will add to their annual costs and their annual consideration costs, so I think what this will do is push people to other modes and means,” he said.
“It will impact on an accountant’s ability to service a client even if they are licensees because they will have to go through the proper process.”
Mr Holloway also suggested that it could be a way to “push everyone into industry funds”.
“That might be a bit cynical, but certainly this is an old idea that has been watered down and time is ticking over […] I don’t think anyone is really considering the practical impact of what we have to deal with,” he said.
William Buck national chairman Nick Hatzistergos said accountants are being asked to stop the conversation with clients and before they can offer advice, “go on a fact-finding mission, fill out some checklists, consider how the investment fits within their risk profile, look for potential alternatives and complete statements of advice”.
“For a number of accounting firms it’s going to add a huge amount of time and complexity to the process,” said Mr Hatzistergos.
“It is counterintuitive. SMSFs offer complete control over a person’s retirement savings, but instead, the cost and complexity of managing your own fund is being pushed to point where it is going to be all too hard.”
In relation to George’s previous comments — a reasonably large number of accountants from my experience flog products (of which an SMSF is one) for fees. It’s not commissions but a considerable number of SMSF’s are established to get regular fee income for accountants without any real regard for the clients. A consistent compliance regime is sensible, though there are considerable arguments in relation to whether the current one is overly complex — it should however apply on a level playing field.
Really, ladies and gentlemen, I may be old fashioned but I do feel there is something amiss when we let people of unsound mind walk the streets and throw away their fortunes while worrying about consenting adults. Further, if our legal system allows two consenting adults to engage in behaviour which may result in a disease causing debility or death to one of them, why are we worrying about people losing money? Caveat emptor was always sound advice! I rather doubt more form filling or box ticking can improve it – especially as I have been waiting for months for a response from ASIC relating to breaches of the Life Insurance Act by a life office during the GFC. Put not thy faith in regulation!
This is my final comment on the matter. Now that accountants will have to be licensed (some with a full licence, some with a restricted one)guess to whom the clients will turn for advice? An accountant whom they have know for years or a financial planner who is a comparative stranger? And if accountants can give financial advice will they refer clients to a financial planner? What will that do to the FP industry?
Easy – the tax office/ASIC will just ring the trustees up and ask questions like – who told you to set up this SMSF? I don’t think it will be hard to catch people out and they are even talking about them not having to pay for auditing businesses. I think the asset ownership alone is a flag on who advised the client. If the client has 4 bank shares or all cash for a period of time – its not advice from a financial planner.
Yes Adam, it will be interesting. Those accountants who transgress need to, and should, be dealt with just as they should have been dealt with under the old system if they gave financial advice for which they weren’t qualified. Nothing is different in that regard.
[quote name=”George Lawrence”]The comments are at best silly. Clients will meet the extra costs (these shouldn’t be too much) because accountants will just do what they have done (in my case for the last 40 years).[/quote]
By George it will be interesting to see how ASIC actually police these accountants who have always over stepped the Accountants exemption and will continue to provide illegal AFSL advice with zero AFSL compliance ??
Advisers have had been required to provide SOA’s etc because they have been so busy flogging product to their benefit and not their clients for so long , something had to be done. Most accountants don’t flog products for commissions. This is what distinguishes accountants from so called financial advisers. However the government in its lack of wisdom, have put all together to protect the big unrepresentative self-profiteering swell called industry funds. This will backfire for everyone
The comments are at best silly. Clients will meet the extra costs (these shouldn’t be too much) because accountants will just do what they have done (in my case for the last 40 years).
Given the whole licencing farce has been pushed by the big industry players, wasn’t this part of the grand plan all along? To put a dampener on the burgeoning SMSF industry and coerce people into staying with industry funds.
Welcome to the Financial Planners world. This has been what we have had to endure for years. For some reason, Accountants feel they can effectively provide advice but do so without all the checks and balances of what is needed in the advice world. As a prior accountant, the disparity between what an FP has to undertake and an Accountant for the same type of client was significant. Now that Accountants are required to adopt the same regulatory regime, it is a problem? Unfortunately, I’ve seen far too many SMSF’s set up by Accountants with low balances and very little to justify the change other than the obvious advantage to the accountants retirement plan. Further, I’ve seen quite some illiquid investments (Agribusiness etc) set up in SMSF’s and given the losses which they now endure along with the illiquid nature of others, locks the client into the SMSF. No doubt Accountants are going to be stunned at the level of compliance they will face. Many will cease SMSF work as a result.
Spot-on! It’s a hideous regime that is geared toward financial planners being in the box seat, but not completely.
SMSFs should not be a financial product and contribution and income stream advice should not be in the net of FP advice.
We have the silly situation where Accountants have to ensure advice comes via an AFSL and the AFSL practitioner needing to refer to Accountants for tax advice.
Game, set and match to the Industry Fund lobby.
Its just a shame their intentions were not driven from the “best interests duty”.
Agreed on costs being higher but it will benefit the client. My view, get a good financial adviser to partner with and let them also look at the client holistically. The client will have a well articulated Statement of Advice with all bases covered and have clear direction. Even down to understanding concessional, non concessional contributions, estate planning aspects, why the SMSF meets their goals. They can read this again and again. I don’t think anyone who has the funds for an SMSF (say $1Mil or thereabouts)and wants control etc are going to go to an industry fund as an alternative. Yes, costs will come into play but if the job is done well they will see the benefits. Articulating value is going to be an accountants dilemma initially if they do this process themselves. Unfortunately even financial advisers fail at this sometimes.
Oh wow, imagine accountants finally realising that they have been massively over stepping the accountants exemption for so long and for so many clients. And now they are going to have to work under the real AFSL laws that Financial Advisers have always had to work under.
Who’d have thought they now realise how much time and effort AFSL compliance costs.