The Tax Practitioners Board (TPB) needs to find greater alignment with the current treatment of financial planners by the Australian Securities and Investment Commission (ASIC) and other regulatory bodies when it comes to issuing practice codes, according to the Financial Planning Association (FPA).
In a submission to the TPB providing feedback on a practice note on Outsourcing, offshoring and the Code of Professional Conduct, the FPA made clear its belief that greater clarity was needed to accommodate the nature of work carried out by financial planners, including the possibility of joint regulatory guidance to be developed by ASIC and the TPB.
However, what the FPA submission appeared to make most clear was that there exist clear and significant differences between financial planners and tax practitioners, particularly with respect to the relationship between corporate authorised representatives (CARs) and licensees and the need for this to be recognised and accommodated.
It said this was particularly the case with respect to TPB proposals which would see the service relationship between a CAR and a licensee as a case of outsourcing and offshoring, with the relationship between a planner and their client being viewed as outsourcing.
“While the financial advice relationship is between the client and the individual financial planner professional who must meet legal obligations for the provision of the advice, the corporate authorised representative (CAR) and/or the licensee is legally responsible for the advice and the legal ‘owner’ of the client engagement,” the submission said. “The licensee and/or CAR must also ensure the entity and its representatives are competent to provide financial advice under its licence authorisations, control and supervision requirements are adhered to, and the advice provided to retail clients meets the minimum requirements set in the law.”
The FPA submission said one of the benefits of being an authorised representative was the support services the CAR and/or licensee provided which could include compliance, record keeping, paraplanning, statement of advice (SOA) preparation, fintech tools, research (including product research services and approved product lists), training, and regulatory registrations and reporting.
It said the Tax Agent Services regime required, in most circumstances, the licensee, CAR and authorised representative to be registered with the TPB as a tax (financial) adviser or tax agent but that the services provided by CARs and licensees to their authorised representatives fell under the proposed definitions of outsourcing and offshoring in the TPB Exposure Draft.
“Under these definitions, the financial planner who has the relationship with the client would be viewed as outsourcing such services to their licensee or CAR. Similarly, the licensee and CAR would be outsourcing the provision of the tax (financial) advice service to their authorised representatives,” it said.
The FPA urged greater clarity from the TPB and the provision of examples around outsourcing and offshoring, together with greater clarity as two who the client legal entity and registered tax practitioner legal entity are in relation to the provision of tax (financial) advice services.