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Count Financial reveals cost impact of licensing for firms
Recent estimates provided by Count Financial show that for many SMSF firms, compliance with the limited licence regime has cost them tens of thousands of dollars and substantial hours away from their businesses.
Speaking at a panel session at the SMSF Association national conference, Count Financial head of practice recruitment Euan Sneyd said while the compliance process with the limited licensing regime has often been touted as a straightforward process, for most accounting firms, the entire process has taken them an average of 292 days.
“In our experience, it [took] 292 days for the average accounting firm. From the time that they decided to do something about licensing to exploring it to doing RG 146, going and doing some sort of orientation so that they could actually start to produce advice for their clients, just to get to the starting point [it was] 292 days,” Mr Sneyd said.
He said some firms time-costed the amount of time it took to complete their RG 146.
“[Some people] might say it’s eight days, four modules – it’s not that hard – well, some people really struggled. It took some accountants almost two years to get through the program. They’re running a business that’s their main process.
“For some businesses, it was $100,000 worth of time that they hadn’t spent in the business, trying to comply with a regulatory change, and that’s just to get started.”
After these accountants completed the requirements to provide advice under the limited licensing regime, they then had to spend time understanding new concepts such as financial services guides, the Financial Ombudsmen Service and statements of advice.
“You have this sort of year and a half J-curve to get comfortable with the concepts of advice,” Mr Sneyd said.
“While it seems like it’s an easy thing to comply with, it was really time-consuming and it’s a different skill set, they are different conversations, it’s a whole new world of jargon for accountants who haven’t been previously licensed.”
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
Most of you need to read ASIC's Information Sheet 216 (INFO 216).
As expected, common sense has prevailed. Subject to the proper disclaimers, Accountants who are not licensed can still establish, wind up and give advice on SMSFs as they always have, when requested to do so by a client, and subject to the proper disclaimers.
Sorry FP's, you may have won the battle, but now you are losing the War! Haha!0- George are you a 5 year old? When i read Info 216 it says that you cant provide an explicit or implied recommendation. How many clients do you think go to their accountant and ask about an SMSF and come away without thinking the accountant has recommended or endorsed the decision to proceed? I'd venture very few. As you keep saying, clients see you as their 'trusted adviser', so anything you say will be seen as advice. When you're in front of the judge and your clients are saying "We spoke to George and advised us to set up an SMSF....and he made us sign all these papers....and i didnt know what he was getting us to sign..." , how do you think you will go then? The war isnt between financial planners and accountants, it's against being sued by clients, regulators and the courts.0
- RR, I am happy to say that the fees and commissions my clients have paid have always been disclosed (unlike ASIC I don't have a hatred of commissions provided they reflect work completed and are disclosed and believe they are suitable for insurance products). The music streaming company is less than 12 months old so is a much more recent example than financial planning products given that commissions stopped on new investment products from 1/7/2012 (I think that date is correct but will be OK if I am corrected). In addition I know at least one accountant that is still operating who recommended the majority of his clients invest into a lending company in which he held equity and this was not disclosed to the clients, if he was a planner ASIC would have hung him by the ....
To summarise I believe both accountants and financial planners are guilty of making unethical decisions and I doubt either of us are up to assessing the ethical standards of each profession as a whole. The changes in licensing provide an easier approach for clients to take action against inappropriate advice from an accountant and will increase the probability of them being reimbursed if they receive inappropriate advice whilst providing a level compliance field -- therefore I support them. If accountants choose not to provide SOA's or only act on client direction, which are common approach's at present, then they are breaking the law and deserve to have action taken against them.0- Why is client direction illegal?I am not licensed and I don't touch SMSF's full stop because I'm not interest in the risk involved but I was under the impression that setting up a fund under client direction was ok.0
- Because we all know that most of the time advice is provided under the guise that it was 'client directed' to get around compliance requirements.0
- Lots of PI exposure for accountants saying it is client directed. I'd want to get a really good client sign off for that. As everybody, Accountants or Financial Advisers all know a client is going to say they were advised to do it if ever asked. And 99 per cent of the time they have been advised to do it anyhow. And if an accountant is not AFSL licensed and do get blamed for providing AFSL advice, then they won't have any PI to cover them if it goes wrong. Ouch !!0
- Met with some new clients last week who had an existing SMSF set up by an accountant recently (post 1st July 2016). Fund was set up based on 'client direction', no SOA provided, no advice provided, no warnings about loss of insurance, just an instruction to go get a bank account sorted and you can use these forms from the ATO to rollover your existing super. Clients have done all this and now find they have no insurance. The husband went bike riding on the weekend and one of his co-riders came off his bike, busted his elbow, has had surgery and requires more. He'll be off work for at least 2 months, possibly longer. They were unaware that their insurance didnt transfer to their new SMSF and he was almost sick at the thought of the potential outcomes if he was the one having the accident instead of his mate.
Hopefully the changes to the licensing requirements will reduce the potential for this sort of thing happening.0- Haha mate I see that just about every week.
Same thing with no quarantining of tax-free pensions leading to adult children paying far, far more tax than they need to be upon death.0
- Is that the same easy money that is earned via hidden trails and commissions Spud?0
- Weasel Words, I believe it is the money which is generated through "client directed transactions" that Spud is referring to Alternatively he could be talking about the commissions paid to accountants for olives / trees / mortgage companies / music streaming companies which are after all are good investments from a tax planning perspective. In any care enjoy the new legal approaches available for clients to sue you.0
- And of course, no financial planner ever drew a fee for recommending any of those products did they Scott? Just like they never received hidden commissions and trails for recommending one company's managed fund over another.
I cant believe you are bringing up events that mainly finished a decade ago. Perhaps you know that WW is right and you need to deflect blame.0
- Welcome to the club Accountants this is what Financial Advisers have had to endure for the past 10 years so get used to it as there is more to come. Easy money for you is now over.0
- Welcome to the real world of compliance. If accountants wish to become financial planners, they must understand that if they advise their clients to establish an SMSF then a written advice document should be provided to them to ensure that they understand what they are committing themselves to.
The recommending accountants should then expect an audit to ensure that they have passed the safe harbour test for their clients.0 - And they wonder why so many accountants did not bother.0
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