Speaking on a panel discussion on the Quality of Advice Review, BT head of financial literacy and advocacy Bryan Ashenden noted that a number of the accounting bodies have made submissions calling for legislative changes to made to enable accountants to be able to provide certain types of strategic advice — including SMSF advice.
“The IPA submission talked about how the limited licensing regime was badly designed from the start and required a lot of accountants to [meet new requirements] with arguably with not a lot in return,” explained Mr Ashenden at the SMSF Association Technical Summit.
“I note that the IPA together with Chartered Accountants ANZ and the SMSF Association have made a separate submission in relation to the limited licensing rate and gave an overview of a potential model that could replace it.”
IPA group executive, advocacy and policy, Vicki Stylianou explained that under the proposal, accountants will certain qualifications could be taken out of the financial advice regime and put in the tax regime under the Tax Agent Services Act.
“[It would mean] that where you’ve got [a] professional practice certificate and everything that involves and you’ve done additional qualifications in superannuation and SMSFs, then you would be able to give advice to your clients in the ordinary course of your tax agent services in terms of setting up an SMSF and advising a client to set up, winding funds up, pensions, and contributions,” she explained.
“Essentially, we would be redefining what a tax agent service is under section 90-5 of the Tax Agent Services Act to say that if you give this type of advice in these circumstances.”
Commenting on the proposal, Allens partner and the independent reviewer appointed to lead the Quality of Advice Review, Michelle Levy, said she had concerns about creating exceptions for particular professionals within the advice regime.
“I have the concluded view that I don’t like exceptions. I think they are inconsistent with a principles-based approach, which is what I am preferring,” Ms Levy stated.
“I worry about creating exceptions, and I think there needs to be a very compelling reason to do that.”
Ms Levy was also questioned on whether she would consider separating strategic advice from product advice and allowing advisers to provide advice with reduced compliance requirements where the advice is solely focused on strategy.
Mr Ashenden explained that one of the key concerns for financial advisers was separating strategy from product.
“As an example, if I want to talk about superannuation then am I starting to talk about a class or product and therefore I will be captured under the licensed advice regime? If I’m talking about an SMSF, it may be a product that doesn’t even exist yet because the fund hasn’t been set up”
Some advisers and industry groups have raised the idea of uncoupling the strategic advice from product advice and allowing that advice to be delivered with less disclaimers and shorter statements of advice.
Ms Levy said she wasn’t sure that segmenting advice into different types would be helpful.
“Rather than segmenting, in my view the regime needs to be broader, not narrower. The way I think about this is that it should be easier to give financial advice whether that includes strategic advice, product recommendations or credit advice,” said Mr Levy.
“It seems to me to be a very bizarre world where you can speak about credit under one regime and superannuation interest under a separate regime.
“My hope is that my recommendations deal with that as a whole. In my view, what is required by the adviser should adjust according to what you are specifically advising on. If we move to a more principles-based regime, then I think that its easier for the law to respond and puts the responsibility on the industry. The question is to what extent the industry is ready for a more principles based approach.”
“I don’t think there should be a different regime for strategy advice from a product recommendation.”
[quote=Accountant]I think you are forgetting that Accountants were always able to give smsf advice before exemption were introduced then a demand on ridiculous education. In fact accountants have done more for the smsf industry and wealth creation for their clientele than any other industry body…..pathetic…..[/quote]
I think you are forgetting that Accountants were always able to give smsf advice before exemption were introduced then a demand on ridiculous education. In fact accountants have done more for the smsf industry and wealth creation for their clientele than any other industry body…..pathetic…..
What would be the alternative to a principle based approach
Please explain what is a principles based approach.
Talk about feathering their own nest. Lawyers and insurance salesmen? Accountants are at the coleface with their clients, the rest are just hangers on.
SMSFs should be treated as a tax structure. An SMSF is not a financial product. The investments within the SMSF are financial products. Pensions, contributions, establishment, wind up are tax advice. To advise in tax advice on these strategies you should have knowledge in the SMSF area and keep up with relevant CPD.
Anon – this is quote of the year!
Disappointing murmurings coming from the head of this review.
If you start from the position that financial services is being strangled by a Gordian knot of regulation and, how could you start anywhere else, then there has to be clear cut-through to loosen the hold.
The ability to issue limited scope or episodic advice is very difficult whilst Step 7 of the safe harbour steps remains in the Corps Act. It would be great if Michelle Levy in her front running her review outcomes indicated that the removal of Step 7 was on the table.
It would also be good to hear that a regime change in the way ASIC regulates the sector is on the recommendation table. ASIC has unfettered/unchecked interpretative power that has done much to create the culture of, compliance at all costs, rather than deliver the edict of consumer protection that Chapter 7 is supposed to be about.
It would seem a “root and branch” review is not on the table.
As for indicating a preference for principles based approach, yes I expect many would prefer that model but unfortunately there is a huge impediment to that working as intended – the legal profession that benefits disproportionately from the financial services regime. Look what happened when the principles based Code of Ethics landed. The lawyers got to work to raise anxiety, concerns and risks (any word that equates with – you need legal advice) to ensure that advisers found it difficult to embrace a regime where professional judgement was paramount.
As a lawyer, Michelle Levy possibly can’t see her profession as an enormous part of the problem here. But there you go, there are conflicts of interests everywhere.
So let me see, the reviewer is saying that exemptions to accountants is not a good idea but it worked perfectly fine for 70 years prior to 30th June 2016.. Accountants just want to be able to do the following: tell a client to put contributions in cause its good for their tax position, tell a client to start a pension again cause its good for their tax position, tell a client that they should open up a smsf, again good for a tax position. product advice about shares etc leave it to the planners.the system as it is currently is flawed and the public are missing out or just ignoring what the govt has in place and doing their own thing, who wants to pay $3k to get a planner to say yes go ahead open up a smsf when they already have done their own homework or a friend has successful done it, why cant an accountant recommend it, the accountant knows the clients background knows how much they can transfer in to make it worthwhile,knows the contributions and tax postions. accountants have been rorted by the current rubbish limited licencing system and anything that replaces it will also be flawed. i dare say that the big banks had a lot of sway with the previous federal govt……bring back the accountants exemption on those 3 things that is so simple, there i can save the govt millions in not having a review.
Well said
Perhaps have a better understanding of those exemptions and what could be done under 7.1.29 and 7.1.33. Reality is the exemptions did not work as they did not allow you to recommend a client to start a pension, do TTR strategies, contributions, LRBA’s etc. The only exemption removed was the recommendation of an SMSF…thats it. Hence why the limited license was more broad that just SMSF establishment to FIX the issues with the exemptions. That is not to say the limited license regime has worked but those who have followed the process would have discovered a lot more about their clients…why? because the accountant does not know everything about the clients (e.g. personal savings, non business debts etc that is necessary for some of these strategies) but is absolutely the trusted adviser. Further to that, those who did go into the limited licensing space made a point of being specialists and have done additional education which can only be a good thing.
Regarding product vs strategic advice, doctors provide clinical diagnosis and recommendations for remediation. We have medical standard boards and we have government approval processes for drugs, these are totally independent of each other.
Is the answer not before us???
Delete Chapter 7 of the corps act, remove ASIC from advice, they don’t understand nor respect it, let them regulate the “drugs”, the product, and have an independent professional standards board to regulate advice.
If you want to do either, product or advice, you MUST be licenced.
Simples.
Under the tax act starting a pension, stopping, contributing, making death benefit payments could be incidental to tax advice and therefore under purview of an appropriately qualified and specialised accountant. The problem comes with establishment, if you are unlicensed as there’s insurance to consider, esp with current problems in medical underwriting, and est of an SMSF is implicit advice to close a superannuation product and perform rollover.
SMSF’s need to stay under the licensing regime for est and windup unless it’s out of the super system and whatever the regime becomes but accountants should be able to provide comprehensive tax advice to their clients.
Practically this means that if they think a client might be suitable for an SMSF they can refer them to an appropriately qualified professional, once established (if it is indeed appropriate) they can continue to manage the tax affairs of their clients like they almost always have been allowed to do.
I support the submission by IPA and Chartered Accountants ANZ it speaks to heart of what our clients expect from us as clients see their accountant as independent and impartial! Accountants can not do their job properly if they can’t provide strategic advice to their clients, this is asked of us every day. Understanding strategy is a totally different concept to understanding products, without a strategy a decision about products can’t be made and implemented.
Why would a professional put his future at risk in trying to comply with all these rules. Regulators seem to enjoy having a go at picking a new rule each day to nail us down.
But the crooks have a field day.
Steer clear.