The financial services industry has experienced a raft of regulatory change in recent months. SMSF practitioners have also been subject to these changes, particularly with the removal of the accountants’ licensing exemption, and the introduction of the Tax Agent Services (TASA) reforms.
Broadly speaking, these changes intend to substantially lift the competency and training requirements for advisers, as well as significantly increasing the level of regulation across the board through new registration and licensing regimes.
However the key challenge with these reforms, particularly the changes introduced under TASA, is to ensure that the costs of meeting the requirements do not outweigh, or even more critically, undermine the consumer benefits they have been designed to achieve.
Very few in the industry would argue against changes that are intended to enhance the skills and professionalism of advisers, ultimately resulting in an improvement to the quality of advice provided to their clients.
The SMSF sector has experienced significant growth over a number of years, and in order to maintain that growth it is important that there is a high level of confidence in the sector stemming from professionals and their clients.
If the competency and training requirements introduced through TASA and the accountants’ licensing regime are designed correctly, such changes are likely to improve and help maintain confidence in the SMSF sector, bringing benefits for both clients and advisers alike.
The challenge for SMSF advisers will be to determine how they can continue to provide quality advice to their clients at an affordable price, whilst making the necessary changes to their business to meet the new requirements.
In regard to TASA in particular, the costs involved in meeting the regime will largely depend on how the dual regulatory regime of the Tax Practitioners Board (TPB) and the Australian Securities and Investments Commission (ASIC) is structured and the extent to which duplication is reduced and efficiencies are gained.
Under the TASA reforms, SMSF advisers providing tax advice to their clients will be required to be registered by the TPB and demonstrate a level of competency and experience set by the TPB. The reforms are intended to bring financial advisers providing tax advice - which may be incidental to the comprehensive financial advice they provide their clients - under the same broad requirements and regulatory regime as other professionals providing tax advice.
While there are clearly consumer benefits in ensuring that there is a minimum level of competency for tax financial advice, the level of education and training required should be relevant to tax advice delivered in the financial planning context.
Ensuring an efficient dual regulatory regime for the provision of tax advice by financial advisers will be critical to ensuring the objectives of TASA are met without adversely impacting the availability or affordability of financial advice for prospective or existing clients.
For all advisers, the dual TPB and ASIC regulatory regime represents a risk that the cost of providing financial advice will increase by virtue of the need to undertake further training and comply with two, potentially disparate, regimes.
However, for SMSF advisers that are currently operating under the accountants’ licensing exemption, the dual regulatory regime will be an even greater change, with a two-fold increase in the training and general regulatory requirements to which they are subject.
For existing advisers and licensees alike, the current training requirements represent a significant investment of both time and money, particularly when considering the ongoing continuing professional development requirements. This cost is ultimately reflected in the cost of the advice, and borne by the client.
This highlights the need for an efficient regulatory regime whereby the training and competency requirements required to be met by those providing financial advice, which includes tax advice, are clear, relevant to the type of advice provided, and not duplicated across the two regimes.
With the TASA framework being developed within the same broad timeframe that ASIC is reviewing its training and competency requirements for financial advisers, the regulators have a unique opportunity to work closely with each other and the advice industry to develop a holistic, efficient and relevant framework that will essentially achieve the desired outcomes of raising competency and professionalism without negatively impacting on the affordability and accessibility of advice.
David Lane, CEO Count Financial