In response to Section 4.6 of the Quality of Advice Review Issues Paper, Chartered Accountants ANZ (CA ANZ), the Institute of Public Accountants, and SMSF Association have prepared a joint submission outlining a new model for strategic superannuation advice.
The submission noted that due to escalating licensing costs, ongoing compliance costs and the unintended consequences of the FASEA regime, most of the estimated 1,600 members of the major accounting bodies and the SMSFA who are authorised to provide limited advice have ceased to do so.
For many accountants, the submission stated that superannuation advice represents only a small portion of their business and it is simply no longer viable for practitioners to provide.
“Consumers need access to affordable strategic superannuation advice, which can be delivered through an efficient and effective model, utilising suitably highly qualified professionals with adequate consumer protections in place,” it explained.
In the submission, the professional bodies outline a proposed solution which involves amending the definition of a tax agent service in section 90-5 of the Tax Agent Services Act 2009 (TASA).
Under the proposal, qualified accountants who operate under a certificate of public practice and are a registered tax agent would be able to provide simple strategic superannuation advice where they are either:
- Listed in the Register of Relevant Providers as at the date of the date the legislation is passed or within two years
- Accredited as an SMSF specialist advisor by CA ANZ or the SMSF Association, or
- Meet any SMSF specialist accreditation requirements specified by the Tax Practitioners Board
Under the proposal, practitioners that meet this criteria would be able to provide advice on the following areas:
- Calculating and making a payment of any contribution to an existing superannuation fund or an SMSF;
- Establishing a pension and calculating payments in connection with a pension payable from an existing superannuation fund or an SMSF;
- Establishing an SMSF;
- Winding up an SMSF
The SMSF Association and accounting bodies stressed that they were not looking for a return of the old accountants’ exemption whereby any qualified accountant could advise on superannuation and SMSF issues without additional training and consumer protections.
“This proposal could be achieved either by way of inclusion in legislation, in TASA, or by way of regulations, in TASR, or by way of Legislative Instrument,” the submission stated.
“While a legislative instrument is the most expedient method, inclusion in primary legislation would provide the most certainty. We would also be pleased to consult further on the most appropriate method of enactment.”
The SMSF Association and accounting bodies urged both the Quality of Advice Review and new Labor government to urgently consider its recommendations.
“We ask that suitably qualified accounting professionals with added conditions be able to provide advice in limited specific areas of superannuation without the need for an AFSL, so as to meet existing considerable consumer advice needs.”
In a separate submission to the Quality of Advice Review, a group of accounting bodies and financial planning associations — collectively called the Joint Associations Working Group — outlined the need for a more consumer focused regulatory approach with reduced costs and greater recognition of professional judgement.
The submission explained that current regulatory requirements are confusing, complex, overwhelming, and do not cater for the needs of clients.
It has called for consumer facing advice documentation requirements to be reviewed to ensure that the advice is meaningful and can be understood by the individual consumer.
It has also recommended a move towards a principles-based regulatory regime that is more consumer-focused, based on recommendations from the Quality of Advice Review and the ALRC review outcomes, and is tied to the need for professionals to be able to respond and deliver advice aligned to different consumer and client needs.
This proposal needs to include establishing an investment strategy or asset allocation advice, otherwise will be useless. Often the limited licensee need to transfer to full advice is for a piecemeal outside of areas covered – investment strategy or risk protection (appropriately or often inappropriately as cannot be achieved comprehensively enough to do properly as to avoid risk of not stepping over the line). Either have no exemption or difference, or an easier pathway to regulated adviser.
The best thing accountants did was cease their license. Finally we hace been heard
Whilst in principle the recommendations are sound, there seems to be some oversights that may derail some of the more solid recommendations. The most obvious is the recommendation of a SMSF. That is a biggie in the Corps Act and generally requires the comparison of the existing product, the recommended (SMSF) and an alternative. Where there is insurance in the existing, the recommendation to rollover to a SMSF is fraught even is it is just the token group insurance provided in industry funds. Until SMSFs are carved out of the definition of a “superannuation product” in the Corps act, much of what is proposed under the ‘Accountant’s Relevant Provider’ model will be a compliance nightmare.
Advice to make a $27,500 concessional contribution is pretty low touch but it is still “superannuation product advice” so needs to be in a SoA or RoA. Where the rec is for maxing out non concessionals, an opportunity cost analysis is required. Starting a pension requires a cashflow (at least according to ASIC) so, all in all, lots and lots of paperwork entailed in all of the recommendations above.
What is needed before the extension of relevant providers is progressed is a fundamental change to the definition of financial product advice requirement when it comes to superannuation. Most accountants argue that a SMSF is an investment vehicle not a “product”. The problem is, the strict compliance regime that accompanies superannuation regardless of how held means that the vehicle is subject to the onerous financial services disclosure laws. This is even though, superannuation is so heavily regulated by either APRA or the ATO that it rails are very tight. The first step therefore needs an understanding of what is the harm/potential harm to ‘consumers’ is, if they are subject to less rigorous disclosure when it comes to super. Once that is defined then the necessary adjustments can be made. The harm was real in the wild west days where financial services constituted product sales and strategic advice was on the periphery however, these days, the sales focus has lost its force and there is not a lot of differentiation in APRA (super) products. SMSFs are special and care is required but the risks are not limited by the current disclosure regime. something has to give and that is in the definition of financial products as they apply to super.
The investments within the fund and any risk is a product. It’ll be verballed or half-cocked otherwise if existing product can’t be considered, the underlying investment/s diversification and risk protection