SISFA managing director Michael Lorimer told SMSF Adviser that bringing back any form of exemption for accountants giving advice around certain aspects of SMSF set-up and management was unnecessary and “fraught with danger”, as it could see unscrupulous operators taking advantage of perceived loopholes in the law.
“To try and attempt to have relaxation of rules or carve-outs to certain segments or professions is fraught with danger and people will abuse that, either deliberately or in blissful ignorance,” Mr Lorimer said.
“In all facets of law, the more exceptions to the rule you have, the more anomalies you get, and at the end of the day, is [that law] really achieving its objectives? I think the overarching outcome from anything has to be what’s going to achieve a regime that creates the best outcomes for end consumers.”
Mr Lorimer said while he commended the accounting and SMSF industry bodies for taking a “blank canvas approach” when it came to reform of the advice framework, he was not convinced the current system needed to be drastically changed given that accountants could comfortably assist clients on a number of issues without needing a licence.
“If you look at ASIC’s Information Sheet 216 which talks about licencing requirements for accountants, it goes to some lengths to set out in plain terms that compliance services in relation to SMSFs can be provided without the need for a licence at all,” he said.
“There would be a significant number of accountants who were previously relying on the old exemption [to provide SMSF services] and would have found no need to do so if they had a guide like this in place at the time.”
Among the services ASIC listed as permissible for accountants to provide without a licence included tax advice on SMSF investments, tax agent services related to the fund, and advice provided for the purposes of compliance with super legislation, such as informing a trustee of the contribution caps available to them.
“Advising a trustee on the administration of a pension, for example, doesn’t require a licence — drawing a distinction between how a pension operates or can be put in place versus recommending to somebody that they start a pension from their SMSF, that is where the line is,” Mr Lorimer said.
“If the client is asking the accountant the sort of question that requires advice and they don’t hold the appropriate authorisation, that’s the point where a person who is appropriately licensed is brought into the room, and I don’t think there’s anything wrong with that.”
The comments come following the establishment of a working group between the accounting and advice industry bodies and the SMSF Association, with the aim of reforming and simplifying the current advice framework.
Speaking at a Pritchitt Partners event last week, SMSFA chief executive John Maroney said the groups were working through a blueprint to take to government around a more workable advice model that would also aim to provide a level playing field between accountants and advisers.
Ah but is it “financial product” advice? And what is ‘advice’ anyway? The law defines it as ‘inferred influence’. But could that be interpreted as only applying to people who ‘sell’ or ‘push’ a particular product?
These are the questions that ASIC and the accounting bodies have not answered for 5 years+ Those QC’s seem to be able to spin financial services laws in all sorts of ways – look at the Westpac ruling and then appeal.
ASIC needs to be careful as the implications of what accountants are doing may apply to a whole lot of other practitioners who “advise” (i.e. tell people stuff in various ways) but don’t push specific product e.g.:
– administrators
– customer support staff
– various counselors
– life coaches
– social workers
– teachers
– various types of lawyers
– writers
etc
ASIC statement on their website: “Since the repeal of the accountants’ exemption, accountants who wish to provide advice about acquiring or disposing of an interest in an SMSF must now be covered by an AFS licence (either by holding a licence or as a representative of a licensee).”
Note the definition of advice here means “a recommendation or statement of opinion that is intended to influence a person in making a decision in relation to a particular product or an interest in a product, or could reasonably be regarded as being intended to have such influence.” It includes “general advice” – which also requires an AFSL to provide.
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-127mr-asic-reviews-accountant-compliance-with-changes-to-smsf-advice-licensing/
Agreed. How could you claim the whole SMSF service provided by a GOOD SMSF accountant (which includes tax advice) isn’t regarded by the client as intended to influence (help) their decisions in relation to a particular SMSF??
I think Michael’s argument might be technically correct – but only if the client fully understands the regulatory nuances that apply to each aspect of the service. In reality the overall scenario is clearly caught by the spirit of the law – given that clients simply think they are getting “advice” – without knowing all the definitions and exemptions. For goodness sake, accountants don’t even know the definitions and exemptions so how can they expect their clients to !!
It’s not worth taking a risk here. Every accountant’s PI insurer puts an exemption in the policy for any action that required an AFS license.
So if there were ever a dispute that you’d overstepped the line then your PI insurer will simply walk away from you.
Hi Michael. I am a financial adviser who receives referrals from unlicensed accountants.
I shall now tell them there is no need. MICHAEL LORIMER FROM THE SISFA warrants to accountants that they do not need licenses or to refer their clients to a financial planner. Michael Lorimer confirms that accountants can safely give tax advice and compliance advice and guide their clients decision making but won’t invoke the word ‘influence’ within the definition of financial product advice in S766B of the Corps Act.
Great stuff. All sorted. Nice one. I’ll be sure to notify my PI insurer.
[quote]“Advising a trustee on the administration of a pension, for example, doesn’t require a licence — drawing a distinction between how a pension operates or can be put in place versus recommending to somebody that they start a pension from their SMSF, that is where the line is,” Mr Lorimer said.[/quote]
And this is where the problem is because if a client asks about how to start a pension, we can tell them, yes, but then the client thinks that that is advice because of whatever reasons. And then it is deemed to be advice because the client can’t tell the difference between compliance guidance and recommendations.
So it’s advice and you need to be licensed, I’m not sure what the problem is? If the client perceives it as advice it is advice. It’s as simple as driving 60 km/h in a 60 km/h zone.