Accountants seek voice in retirement advice provision

30 May 2019

Accountants have sought a place at the table when the Government initiates a review of the retirement income system, suggesting an essential element is proving access to affordable financial advice.

The Institute of Public Accountants (IPA) has welcomed a recent announcement by the Treasurer, Josh Frydenberg that he will be commissioning a review of the retirement income system which will be inclusive of the interfaces between superannuation, government pensions and taxation.

Commenting on the move, IPA chief executive, Andrew Conway said the review was long overdue in circumstances where there was no well-defined view on what a retirement living standard should look like.

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“There is also the budgetary considerations of funding the age pension and superannuation tax concessions and ensuring that the system is sustainable going forward,” he said.

“The need to encourage greater investment in superannuation to facilitate self-funded retirement is critical as Australia will not be able to fund government pensions in the future, especially considering our ageing population,” Conway said. “Different mechanisms need to be considered given the longevity risk when superannuation members retire. This includes the development of annuity type products.”

However, he said there was significant complexity in the system with many competing interests, which all needed to be given due weight if Australia was to develop an equitable retirement income system.

“For instance, we cannot ignore the findings of the Productivity Commission report which suggested reforms to benefit members through lower fees and higher investment returns could generate an extra $533,000 for a new job entrant today when they eventually retire,” Conway said  

 “An essential element of this review will be to provide access to affordable financial advice, which is what public accountants, as trusted advisers, can deliver,” he said.

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Currently accountants are able to provide advice in this area and they already do but obviously not product advice. The limited licence allows them to do SMSF only on the product side which is a very expensive and time consuming option for accountants. What is Mr Conway suggesting the role of accountants should be?

Accountants are actually in the best position to provide affordable advice. They don't need to do any product research. They don't need to understand their clients' situation and requirements. They don't need to document anything. Because there's no documentary evidence, they don't need the inconvenience of licencing or PI insurance or EDR membership. All they need to do is (verbally) recommend an SMSF with "blue chip shares" and a cash account which they will administer for an ongoing fee. If the client wants non super investment they will (verbally) recommend a negatively geared investment property for which they will do the tax admin for an ongoing fee. And because accountants' clients trust them, this conflicted advice must obviously be in the client's best interest!

Clients enjoy superior outcomes when professionals stick to their own areas of expertise. I don’t try and submit my clients ITR’s and our referral partners don’t try and build retiree strategies and portfolios.

I had one accountant tell my client who was under 65 to start a pension to save tax, failing to realise we had quarantined all of her husband’s wealth there to get him the age pension. Sure she would have saved $3k in tax but lost $17k in income.

Lol yep, thats very topical for me. Just had a client come over my desk where an Accountant 'unofficially' advised them to consolidate account based pensions. It was clear after the fact that the previous adviser at another firm has set up several pensions to draw down the higher amount from a taxable component pension then minimum from pensions started with non-concessional (tax free) contributions. Probably cost the clients 7 figures by the time they die. Irony is, it was a tax strategy and they stuffed it up.

Don't tell ASIC - the strategy would confuse them for years.

If you want to be an Adviser, go get licensed. It's that simple.

I believe that Accountants don't even know who they are. Tax Agents? Business Advisers? Bean-Counters? Financial Planners or Advisers? Business Management Consultants? Property Advisers? SMSF Sales-People? If they are going to give financial advice though, they do need an ASIC Authorisation. Simple.

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