Regulatory burden impeding access to super advice, says CPA

The accounting body is currently seeking feedback from members on what inefficiencies they currently experience in the regulatory framework when servicing clients.

The green paper noted that, over the past two decades, advice and services traditionally provided by professional accountants have become increasingly regulated.

“Often these reforms appear to be implemented in isolation, sometimes duplicating existing regulation, without appropriately considering existing legislative obligations, interactions with other regulatory regimes or how multiple reforms may impact the provision of advice and services, and importantly the associated compliance burden and cost,” the paper said.

What is often overlooked, the paper said, is the fact that many of these recent legislative reforms have and are impacting the same group, professional accountants providing advisory services to their clients, many of whom are consumers themselves and also small to medium business owners.

“For example, the definition of tax agent service in the Tax Agent Services Act 2009 was amended to capture the tax consequences of financial product advice provided by financial advisers,” it said.

“This resulted in financial advisers being required to register as a tax financial adviser (TFA) with the Tax Practitioners Board (TPB). If the financial adviser is authorised to provide the advice under a Corporate Authorised Representative (CAR) structure, they must also register the CAR as a TFA. Where the financial adviser is a professional accountant, it is common for their practice to also be registered as a company tax agent.”

This means that three registrations are needed to provide professional tax agent services to clients, it said.

“Additionally, where a professional accountant is licensed to provide financial product advice, they are prohibited, in their capacity as a professional accountant, from providing advice to clients about how they can comply with superannuation legislation,” the paper noted.

“Rather, ASIC requires this advice be provided in their capacity as a financial adviser, resulting in higher costs to their client. In contrast, an unlicensed professional accountant can provide this type of advice under Regulation 7.1.29(5) of the Corporations Regulations 2001. The complex legislative framework is very difficult to understand and navigate.”

The paper said that increasing costs have prompted many professional accountants to consider whether they continue to provide financial advisory services to their clients.

“This is despite client demand for such advice and services or increasing pressure on profit margins in more traditional accounting advice areas,” it said.

CPA said that, recently, a number of professional accountants have advised CPA Australia that they have decided to cancel their Australian Financial Services (AFS) licence.

“The increasing compliance, professional indemnity insurance and ASIC industry funding model costs are making it cost-prohibitive to continue to provide independent financial planning services to their clients.”

The complexity of the current regulatory framework is having a negative impact on consumers seeking financial planning advice, the paper stated.

The proposed standards set by FASEA and reduced numbers of financial advisers will also impact the accessibility of advice for the broader community, it said, through reduced supply, higher market concentration of providers, and likely higher costs.

“Despite the intent of FASEA, the impact on the quality of services remains unclear. With an ageing population and compulsory superannuation to help prepare for retirement, valued experienced financial advisers need to remain in the sector,” it said.

The paper also said that ASIC’s industry funding model may also have negative implications for consumers as it may encourage further market concentration, particularly in financial advisory services and amongst SMSF auditors.

“The fees may motivate behaviours not in the public interest. For example, charging SMSF auditors a fee of $899 for cancellation of their registration may discourage inactive auditors or those not maintaining necessary levels of competency from cancelling their registration and create increased costs for ASIC in deregistering them through enforcement action,” it said.