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Accountants exemption axing created ‘gap’ in SMSF advice: ATO
There is a clear gap in the SMSF advice market as a result of the accountants exemption being removed, according to the tax office.
Prior to 2016, accountants were permitted to give basic SMSF advice without requiring an AFSL. As part of the Future of Financial Advice (FOFA) reforms, that carve-out was replaced with a limited AFSL.
The limited AFSL has been heavily criticised as being impractical and not fit for purpose. For example, under a limited AFSL, an accountant advising on winding down a superannuation fund is restricted from discussing the insurance which may be in that fund.
Despite clear intention from the accounting community to continue providing SMSF advice, the take-up of the limited AFSL has been wildly unpopular, in large part due to the impracticalities of the licence.
Speaking at the Accounting Business Expo in Sydney, ATO assistant commissioner Dana Fleming acknowledged that there is now a gap in the market for basic SMSF advice.
“There is a need in the market to service that gap between full financial advice and smaller matters,” she said.
This issue is set to be compounded by the incoming, mandatory education requirements for accountants providing SMSF advice. For example, as the regulations currently stand, accountants operating under a limited AFSL will have to complete the same level of education as an accountant operating under a full AFSL. This means they will be paying for and taking part in training which they can’t use in practice.
The SMSF and accounting community has mounted a case to the government, and associations like the Institute of Public Accountants have been in talks with Liberal Party ministers.
The silver lining
Some, like Hayes Knight director and Knowledge Shop founder Greg Hayes, believe accountants are now well placed for a land grab in financial advice.
The opportunity of holistic financial planning has often been spruiked to accountants, but this time, Mr Hayes sees market forces working in favour of the accounting profession.
“We are going to see a contraction in the supply of advice at the same time as we’re going to see an increasing demand because of the size of the market growing,” Mr Hayes said.
“If accountants are going to stake themselves in this market, they’ve been given preferential positioning relative to the broader advice market — there’s this opportunity sitting there if they want to take it.
“None of us necessarily like change, but we need to accept that, and whilst this is being worked through, look at the bigger picture.
“The accounting profession is the natural provider for advice in this space. I look at this and think it is an enormous opportunity for accountants.”
@Dana Fleming What advice gap? There is no advice gap. Accountants are just providing tips verbally and getting clients to sign disclaimers. The alternative ($2k fee for pile of paperwork nobody reads) is unpalatable to both client and accountant.
What you gonna do about it?0- As per ASICs general operandi, Sweet F##% All !!!
But do you want to be that accountant sued by client for AFSL advice that is illegal and you don’t have any PI cover ?0
- It is quite simple really. Accountants wishing to offer advice should pick up on their education and join an AFSL. It is disappointing that CA and CPA did not do more before the licencing regime was first burgeoning but regulation and conditions changed and now will remain.0
- Time ASIC and the ATO agreed on a smart path forward. Accountant should be able to provide non product advice to an SMSF. How stupid are we cutting out the most competent and trusted adviser and instead allowing a group of unquaified commission driven shonks to advise Australians.0
- Hey George, a SMSF, a Pension, etc are products. So what ever advice you provide is Product Advice. Yet another accountant that simply breaks the laws for ever and doesn’t even know or pretends not to know0
- Katarina, like many accountants and commentators you don’t seem to understand what the old Accountants exemption actually allowed them to do ?
“Prior to 2016, accountants were permitted to give basic SMSF advice without requiring an AFSL”
Please clearly list the advice they were Legally allowed to give?
The fact being almost all accountants massively overstepped the old exemption and provided bucket loads of AFSL advice with Zero AFSL compliance.0- I did strategic smsf work but now as smsf is a product that is no longer allowed. Accountants should be able to provide specialist smsf advice under an exemption.0
- Ah I think you will find a SMSF was always a product, as is a Pension, etc.
Scary, amazing and just illegal how many accountants never understood and thus massively abused to old exemption.0- Actually a SMSF was a structure, as are a company, partnership, discretionary trust, unit trust etc. Products are what the SMSF holds.
It was ASIC making a SMSF a product that caused all the problems.0- SMSF has been a product for a long, long time0
- Not that long. However just because ASIC says it's also now a product doesn't change the fact it's a structure.0
- Is an SMSF a Financial Product? Crucial to the application of the legislation is the concept of a "financial product".
A "superannuation interest" is specifically included as a financial product. A "superannuation interest" is defined in the Superannuation Industry (Supervision) Act 1993 as a "beneficial interest in a superannuation entity". A superannuation entity is further defined as including a "regulated superannuation fund".
An SMSF must be a "regulated superannuation fund" in order for it to be a complying superannuation fund. As there are no specific exclusions that are applicable, a complying SMSF will be a financial product for the purposes of the financial services laws. :shock::roll:0- And therein lies the problem. If the definition had been left at, or defined at the beneficial interest level instead of the entity level then the entity could have been dealt as a structure but any changes to members benefits would have fallen into financial product. However you are correct in that the law that we now have an SMSF is a financial product.0
- The government (ASIC?) desperately need to articulate an advice framework for accountants with educated, confident clients who just want verbal:
* facts
* ideas (including info on what other clients typically do or what the accountant themselves would do); and
* warnings
... but are happy to retain full decision making responsibility themselves rather than pay to receive written recommendations.
At present accountants must process about 5+ formal documents (FSG, fee&scope agreement, fact find, SOA, authority to proceed) and deliver the above information via a compliant written Statement of Advice. The cost of this compliance overhead = a minimum of $2,000 to open a compliant advice file.
Accountants are therefore forced to claim that the service they're giving is 'execution only'. Even when we all know it's not. ASIC need to clarify if this approach is against the law or, if not, whether it really does require a $2,000 advice file as above or, if not, then what??
0- Hear hear !
And nobody seems to realise that giving "general product advice" also requires you to have an AFSL.
It only means less paperwork per client.0 - Finally some accountants are starting to understand how time consuming and compliance costly it is to provide AFSL compliant Advice.
No wonder they want the good old days of zero AFSL compliance and an accountants exemption that was so abused it’s unbelievable0- We clearly need a middle ground. ASIC - sort it out fast. The 'blame' spotlight is shining on you too now you know.0
- " The accounting profession is a natural provider for advice in this space" - someone finally worked it out ; it took a while !!!!!0
- There is a great book called "Who Moved My Cheese?" It is a short read - highly recommend it.
(Change is inevitable and resilience and the ability to adapt are essential survival strategies.)
I agree with Greg, Accountants have an enormous opportunity here, if they are prepared to move forward.0- And prepared to move from Illegal AFSL advice with zero AFSL compliance to actually doing the Advice job properly with ALL the over the top AFSL compliance the govt heaps on Advisers0
- The best thing the Government could do would be to repeal the limited AFSL policy, return the exemption and get the accountants back to doing what they do best.
Greg Hayes is incorrect about accountants being well placed to head into the financial advice area - firstly the majority don't want to go in that direction (unless that is already their business strategy); and secondly, a limited AFSL prohibits such dealings. A limited AFSL only provides personal advice re SMSF or the client's current super fund, and class of financial product advice in a maximum of 6 products.0 - I am CA qualified and feel our Institute has let us down in this area.
Good on the IPA's for supporting their Members and ultimately the whole accounting profession.0 - The natural provider of unregulated, undocumented and conflicted advice? I guess they are!0
- Exactly and not 1 single accountant has ever been busted by ASIC for the bucket loaned of illegal AFSL advice.0
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