Accountant advice is no better than that of advisers says ASIC

5 November 2019

Accountants and financial tax advisers (TFAs) cannot lay claim to providing better quality advice than ordinary financial advisers, according to the Australian Securities and Investments Commission (ASIC).

What is more, ASIC has made clear that it remains strongly opposed to any move towards reinstating the so-called accountant’s exemption, albeit that the regulator is prepared to support a simplification of the accountant’s limited licensing regime.

The regulator’s views are made crystal clear in its submission to the Review of the Tax Practitioners Board (TPB) recently released by Treasury.

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Amid recent calls by accounting groups for reinstatement of the accountant’s exemption, ASIC said however, that while it did not consider that there was any justification for reinstating the old accountants’ exemption (or modified version of it), “we do acknowledge that there are aspects of the accountants’ limited AFS licence regime that are to difficult to understand and comply with”.

“We would support simplifying the regime through law reform,” it said. “We would be happy to provide input to any such simplification process.”

“Finally, we note that through our work, we have not seen evidence that Tax Financial Advisers (TFAs) or accountants provide more compliant advice or better financial advice for consumers than other financial advisers and do not believe that concessions from the financial advice regime for accountants can be justified on this basis,” the ASIC submission said.

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First time I have agreed with ASIC in a while. In many cases, it comes down to your area of speciality, within the tax law, with both accountants or advisers. For example, both may know the general legislation around super caps, but there can be a myriad of variations, due to legislative history as well. You can get areas of specialities within financial adviser firms, so accounting is no different.

Or another way of looking at it is perhaps is saying the only one who can provide advice is Industry Super.

So ASIC have added 'Gaslighting" to their arsenal now!

Never thought I would ever publicly say I agree with ASIC but do in this case. I have dealt with and continue to work closely with a very large number of accounting firms. Depending on their size and the focus of leadership, i.e. where they spend dollars on training and skills for the firm, the advice around superannuation or even decent financial planning by accountants by and large has been woeful.

I know some readers will take umbrage with that statement, and if you are reading this, perhaps you're part of the few who get it and are decent planners.

did paraplanning for accountants for years. They know the tax side well, which luckily is a big part of advice (or use to be), but no idea on products, fees or investments. Absolutely none. I did the whole portfolio construction for them and they wouldn't know which way was up. They also would recommended a expensive wrap platform within a SMSF. If thats not inappropriate advice I dont know what is.

@ Joey,
Like you I deal with a number of accounting practices and agree with you 100.0%.

They do not do the strategy/product research required by a financial planner, they most often do not know their clients circumstances as well as they should because they don't ask the right questions to delve into where the client is or wants to be.
Most do not understand the nuances with risk insurance, but they do know how to establish a SMSF whether it's appropriate or not for clients.

I've found some who have set up a SMSF failed to put an investment strategy document in place or even discuss the need for one with a client.
Never mind that the client without one, if audited by the ATO, will be subject to a penalty of 49.0% on the total assets of the fund.
Some even recommend TPD in super without explaining the tax liability on a lump sum payment to a recipient that's under 55 at the time of a claim.
And of course all accountants know about what's in the "clients best interest, risk profiling and what's in the investment universe.
If only it was all that easy for financial planners that have to follow an ever increasing compliance regime that accountants feel are above such requirements.

Great work ASIC. This latest push by the accounting bodies is ridiculous. It would just result in poor client outcomes. If accountants want to provide financial advice, then they should be held to the same regulations and education requirements as financial advisers.

Some of the poorest examples of advice I have seen have come from accountants pushing SMSFs in inappropriate circumstances. Some seem to be verbally telling clients to consolidate all their super to the SMSF without doing any investigation, or cost benefit analysis.

One of the main reasons accountants' advice is so poor is because they have a massive conflict of interest. They are highly incentivised to recommend SMSFs due to the extra accounting and audit work SMSFs generate. Similarly for investment properties. These recommendations are often completely inappropriate for the client's situation.

Yet the ideological zealots at FASEA, Choice, CALC, IFAAA etc will claim there is no conflict of interest because accountants are paid by fee for service! These deluded organisations need to break free from the fallacy that payment method determines conflict of interest. All payment methods are open to conflict of interest. Conflict can never be avoided when providing a commercial service. Conflicts can only be managed, by something like a Best Interests Duty.

The best solution for consumers is to get rid of the ridiculous obsession with commissions in the FASEA Standards, and impose a Best Interests Duty on accountants.

100.0% correct !

Have worked with accounting firms, its a mixed bag. Some are good, others less so.

In one case, unfortunately accounting clients were placed into SMSF and inhouse product - no PDS, no SoA - all on the back of the accountants exemption with awful results.

i think you are being very generous, and even complimentary in your description. it's not a mixed bag, mostly woeful, few very average, and one or two good, but they are the exception. this is personal experience from over 20 years.

One of the fallacies about financial planning is that it is all about investments and tax savings. It is, and in the future it will be more so, about assisting clients to achieve their lifestyle objectives and in doing so, the primary skills for advisers will be based on the intellectual capital around objective setting, strategy development, implementation and monitoring and, the most important skill - client management. Tax strategies, investsment portfolios, insurance etc are the tools required to implement the strategy and require more technical skills and less of the so-called 'soft skills' of people management.
The fact there is an exemption for part of the process given to accountants indicates a lack of understanding of the entire planning environment. Further, fees for planning services should be based on the value provided rather than the mechanical methods of time occupied, percentage of assets etc. Value is difficult to determination as it is very subjectives and only be agreed by the planner and client in each and every case.
Perhaps ASIC's stance is a step in the right direction but I suggest that the legislators, regulators and accounting bodies have a long way to go in understanding the brave new world of financial planning.

I think ASIC suffers from a split personality. One day they love planners and hate them the next!!!

I believe ASIC just wants everyone out of funds management other than Industry Super. Anyone else who tries to enter the rivers of gold of FUM and ASIC seems to have objections - yet they have never investigated Industry Super. There seems to be an agenda?

correct. with the endless number of ads on TV and Radio from industry super, they seem to be encouraging people to run off and do their own thing without the need for advice from a planner.

Yeap, the message is loud and clear. Banks are out, AMP and IOOF in a complete mess, huge inflows into Industry Super, Adviser numbers will fall sharply within 18 months and for those non Industry Super adviser that will remain, compliance that almost dictates supposedly low cost high return Industry Super - not to mention sole purpose test, MDA's, how to charge and the now enormous cost of compliance. Industry Super has no oversight and huge unlisted assets supporting their returns - it seems the war is over.

I would have to tend to agree with some of these comments, Accountants are Ok on the strategy but generally don't understand the product or fees etc. They did however, understand that they could get a 10% Upfront Commission on Tax Effective Investments, that by the way have largely "all" gone broke. That was different I suppose and I'm sure they had their own interests in front of the "best interests" of their clients. Wonder why this type of advice and high commissions never came out in the recent Banking Royal Commission.That folks, is another story for another day !

Of course ASIC have a vested interest in keeping as many people within their regulatory grasp as possible...The quality of advice offered by Accountants is subject to the environment they operate within. The advice is limited as to what can be achieved in a 30 minute PAYG tax return meeting. When you charge by 10 minute increments it's always going to be about getting people in and getting them out and seeing as many people as possible. That limitation also applies to writing file notes, doing SoA's, risk profiling. Far easier to offer advice and not leave a paper trail.

Appears to be way too many financial planners commenting. Well, from an accounting perspective, let me say I'm not selling anything to my clients. No products whatsoever. So, as long as financial planners are in the same boat, they can remain quiet. Other than that, many of my clients simply want to control their own destiny. If they make a mistake, they own it. It's utterly wholesome and they sleep much better than someone who has been given terrible advice by financial planners. I don't want the work, but I'll do it if my clients request a SMSF. Impartiality wins here and there is a reason why accountants are regarded much much higher than financial planners. Carry On.

You know what a true professional does? Doesn't blindly act upon client's instructions. They clearly outline the pros and cons and help the client make an informed decision. They look at the client's personal circumstances and provide advice, not set up a SMSF and line their pockets with fees. In regards to the thousands of clients who lost money in trees/almonds/emu farms etc do you think it's fair they own the mistake when they were pushed into it by their accountant who took a 10% commission?

Well, I have never sold products to my clients, that was a bit of a 80's - 90's thing back when people actually believed in the products (not unlike some products sold by planners before the GFC I imagine). But, interestingly I have a few financial planners on my books who have NEVER purchased the things they sell to their clients. I suggest my clients visit financial planners and pay for advice on the proviso they buy the recommended products elsewhere. Fair? I am sure you agree.

WOW, that's the difference between a highly qualified financial planner and an accountant, limited understanding.

"i will do it if my client request a smsf", Executing a client's orders is an order taker, not a professional.

As a highly qualified financial planner professional with a masters degree in financial planning (AQF9), I give clients personal advice (s766B(3) corps act 2001), considering their goals and objectives and ensuring that my advice priorities their interests (s961J corps act (cth) 2001), is appropriate to them (s961G corps act (cth) 2001), and is in their best interests (s961B corps act (cth) 2001).

In the financial planning process, I help them define their goals and objectives, and if required refine them, so that the advice I give, meets those goals & objectives (so it is appropriate to them).

my high quality advice doesn't just meet their needs, goals and objectives, it also satisfies the requirements of the law, including obtaining informed consent - i.e. the advice I give equips clients to make informed decisions about their finances. This includes understanding implications of my advice, and alternative options that may meet those objectives at a lower cost and time.

I have seen very very few instances where smsf's are appropriate and in the best interests of clients (buying an own occ BRP is a good example where it is appropriate).

unlike yours, my clients, are fully informed, they know exactly what advice they are getting and why. You will understand the implications one day if you are ever in a dispute.

And that is the difference between a financial planner and an accountant. Higher threshold (best interest vs none), higher education (AQF 9 v AQF 5), more satisfied clients (that's just me).

1000+ happy clients, 0 complaints, 20 + years of service, I won!

V.Smart FP

Simple one. A client wanted his funds capital guaranteed and simply matching the rate of term deposits he owns outside of super. I suggested an industry based fund. They could only offer capital guaranteed funds at an earning rate of half of what an investment in a term deposit offered. Quick SMSF later and he was up and running and perfectly happy. I wonder how many financial planners recommend industry based super funds, especially given their continued ability to perform better than products driven funds typically foisted on individuals by financial planners. Carry on. I left out the boring bit about me having an AFSL by the way.

Perhaps accountants smirk a little at financial planners because they see the end result of the advice and how much it means in actual performance. Which is often terrible. But yes, there is room to work together, however a referral arrangement will never be in my (honest) dealings with my clients.

we have issues, we are addressing them. by 2024, there won't be any salespeople left in financial planning. everyone has legacy issues so do we, 10% of accountants do not have any degree, that's fine, they are highly experienced thus qualified by experience, so they should be -and rightly so - grandfathered and continue to practice.

in the future, all financial planners will look like me, young (43), very highly qualified (multiple masters degrees), rich and good looking, and with a personality to boot.

can you handle it ? we won't need a referral relationship with you or anyone, because, by the time the general advice provisions in the corps act are rid of, you won't even be able to say "blue chip" unless you go through a financial planner and get personal advice.

I won! Again.

V.Smart FP

Financial planners love winning from their clients! Some actually even think they are needed in order for people to make money. All of it rather amusing. Especially when I see how they perform. Given I have 2000+ clients, I guess I'm winning at the moment. But new laws might make planners increasingly required. What a funny world that would be! I still think they should only do fee for service with products readily available for purchase externally outside of their greedy little kickback arrangements. But hey, that's gonna mess up the existing money making machine.

you haven't met a real financial planner yet. you should meet one, it will be a real treat for you. i guarantee it. they will know more than you.

you lost.

It's strange how you keep banging on about the separation of advice and product, yet provide an example where you recommended a product, yes a SMSF is a product, it's scary that you can't understand this. A product which you in turn generate accounting fees on. But keep lecturing financial planners on how to do their job, I can't wait until ASIC has a close look at your AFSL, I'm sure you will stop smirking then.

he doesn't understand anything. that's why I am keeping it very simple. win v loss. he doesn't get it. don't try to educate him. he is not interested, a financial historian, who is about to be relegated to the annals of history.

they are has been's we are gonna be's. gonna be's don't need history lessons from has been's.

I am a poet aren't I. I am good, very good.

In your alternate considerations documents on the file how did you address a wholesale or WRAP account that allows TDs for no platform fee or a low % fee against the thousands of $ to run a SMSF? And if the shopping around for TD's could get you a slightly higher rate what was the net of cost benefit after paying higher costs.
Yes i recommend in writing (not suggest like you) industry funds but don't agree with your statement about better returns. At my reviews my clients after fees return is usually sitting in the 2nd to 6th position on the super ratings comparisons. And they aren't an after cost return like mine. You should benchmark your SMSF TDs to that.

Oh mr not a financial planner. Carry on? You mean you know your statement is not beyond dispute so you run away before any reply. Not the least your comment makes no sense. Audit insurance? Big winner among accountants to cover their mistakes. How can a planner not sell insurance? A SMSF is a product my friend and 9/10 only want it cause their adviser OR accountant told them. So you do a favor for a client setting up a smsf they don’t need? Who picks the investments? What Count Financial who’s 1000 strong accountants set up SMSF with wrap platforms inside to line their pockets? Btw, never been an adviser, just a lowly back office servant.

Adviser for 30 years here. Do you agree about paying for advice only and then buying the products elsewhere? I think it's lovely and encourages a little more integrity in the system. Which i am sure you would be happy with.

Don’t have a problem with that. The way fee for service is going it will be pretty much that. Pay for the cost of the expert, just like how most solicitors work. Was confused by your industry fund comment. You nearly recommended one, but it wasn’t appropriate so you opened a quick SMSF to get a better interest rate. What’s a quick SMSF compared to others? Wouldn’t these ongoing costs of maintaining the Fund negate any interest gain? So you have a AFSL, so you are actually a authorized planner? This gets deeper.

I just bothered to get a limited licence. I had to do a course about term deposits so I could advise on them. I'm literally a genius now thanks to those courses. Who would have thought!

Yes i agree this is the best way forward. I take it that you don't do the admin and compliance work for your SMSFs and tell your clients to get them via a lower cost arms length online provider.
If not then you are as bad as an adviser being paid for advice and selling the product.

All funny stuff. So you have 2 million in a term deposit in your SMSF and pay about $1000 a year for all compliance to do with it. Big deal. A financial planner would salivate at what they could sell this old dude. Yet he remains completely happy. Unlike many of the bank financial planners, I know he's happy because I see him often.

I have about 70 SMSF clients and they all wanted them. Many of them wanted their commercial properties in there, that's why they did it. Sounds utterly sinful I'm sure. But by all means, keep selling things you wouldn't dream of buying yourselves. Just not to my clients thanks.

Not a fp, you are very lazy, just following what clients ask for blindly . This isnt advice. ASIC will be all over you like a cheap suit ! 70 SMSF clients and they all " wanted them". That dosent wash in the new world. This stupid example of a client sitting in cash with 2M earning what 2.00% if they are lucky being charged $1000 per annum. That is the wort possible place for investors to be at the moment, they have missed out on double digit returns over the past 5 years, because you just followed people wishes, there is no way you are meeting the best interest test.

@Not a fp - why not name your business - sounds like many clients can benefit from your services and should ASIC decide to have a look more closely, you will have all the proof of how you made your client's life better!

Haha...comedy hour. If I have a tax problem (usually complex) I'll refer to an accountant. If I have any other strategy to deal with i.e. cash flows, salary packaging, cap ex.,debt & debt management, gearing, Centrelink, DVA, FTB, investment via direct and funds, risk profiling, super, contribution strategies, SMSF, LRBA, income streams, personal risk including business related, redundancy & termination, estate planning, retirement planning, age care, first home funding strategies, UK ROPS transfers, entities and financial modelling, I'll look after all of those topics and strategies. Phew, no wonder I often add much more value (dollars and peace of mind) to a client than my accountant friends.

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