Accountants have been warned that they cannot simply continue to do what they've always done with respect to self-managed superannuation funds (SMSFs) and advice.
Licensing for Accountants chief executive, Kath Bowler has told a session at the SMSF Association national conference in Adelaide, that accountants need to clearly understand that they cannot continue to cling to the previous accountants' exemption regime.
What is more, SMSF Academy managing director, Aaron Dunn said accountants needed to be aware that the regulator, the Australian Securities and Investments Commission (ASIC) was paying greater attention to the SMSF space and the quality of advice being given.
Their warnings have come as recent data released by ASIC suggests comparatively slow take-up of the accountants licensing arrangements, but Bowler indicated at least some of this might be owed to confusion caused by mixed signals being sent by those organisations offering licensing arrangements.
"Different licensees have applied different interpretations," she said.
However, Bowler said accountants who opted against becoming licensed needed to be sure they did not transgress into advice areas and would need to be fastidious with their documentation to prove that they had not done so.
Comments
Calm down people. Everyone knows nothing will change. ASIC has made it clear they think accountants are the "right sort of people" and they needn't worry about trivial regulations. Financial planners on the other hand! Haven't we driven them all out of business yet?
Verbal advice, with no paper trail or accountability, is so deeply ingrained into the accounting profession, it is hard to see many of them licensing. How would ASIC catch them anyway? Will they send out spies to bug their offices?
Would love to see the results of a Shadow Shop from ASIC, to see how Accountants go about recommending or referring SMSF advice.
Claude, I think we all know they will just do what mortgage brokers and property spruikers etc do... Give advice but word it as if they did not.
They will insinuate that a SMSF is the best option and then after convincing the client they will say "the client has instructed me they wish to have a SMSF".
Yes, seeing that already - I have accountants refer me clients, but the client is coming to instruct me to set up the SMSF, and maybe to get advice on Insurance/Investment i.e. they don't want to pay to be advised to set up SMSF, they've already had 'guidance' from you know who and have agreed.
Phil, for your sake, I hope that it is at least appropriate for the client to start a SMSF...
Nothing worse than having to knock back a referral from an Accountant because they client has been instructed to establish a SMSF with 30k... Or one from a Mortgage Broker who has instructed the client to purchase multiple investment properties and wants you to "confirm its the right thing"...
Don't get me wrong I am fine with the heavy compliance in the financial planning industry it just needs to extend to everyone..! Getting there slowly I guess.
the clients have appropriate balances that's not the problem. At the end of the day you can only offer to give advice, if the client rejects it, you can then warn them - if they ignore that, its execution only for that particular part of the process. That's what accountants will do - 'well Mr CLient, after this general discussion it seems like you've decided to set up and SMSF, perhaps you should consider advice, it will cost $2K, but since you've decided you may not want to bother given the cost"...its simple.
Correct.
Under the updated best interests regulations however, everyone should be very careful when even providing 'execution only' services when it has already been acknowledged it is not in the clients' best interests.
Reality, this is going to get very interesting re: referrals from Accountants to set up inappropriate SMSFs! If a Planner tells a referred client 'it is not in your best interests to set up a SMSF' the referrals from the Accountant will likely dry up. Will Accountants shop around for Financial Planners who will follow their instructions re: SMSF set ups? Will those Planners with higher ethical standards be punished as they refuse to set up SMSFs that are not in clients best interests??
If the planner clearly explains to the client why it is not in their best interest after taking into account their full situation/objectives, they should also have that conversation with the referring accountant.
If the referring accountants response is then to find a planner who will be willing to recommend it, then I would hope that their licensee or ultimately ASIC are quick to ban such planners and accountants for not acting in their clients' best interests.
Hopefully bad apples are removed and ethical advisers are rewarded in the long run.
It's great to have rules, but they are worthless unless ASIC enforce them.
Its a bit of a conundrum really. I have had referral sources dry up for the exact reasons you have mentioned however it has turned out to be a great thing. The less time you spend on people providing that type of advice, the better, even if it is slightly detrimental to you in the short term.
I work with some fantastic Accountants now who always provide appropriate advice and the referrals I receive are great. If I didn't cut ties with the previous referral sources I would still be wasting a lot of time on bad referrals.
Short term pain, long term gain.
Spot on Reality, sometimes there is business out there you should just not take up. We as advisers need to make sure we uphold our duty to the clients. We cant just think, geez these guys are not suited to SMSF , then just do it execution only. We can say NO to people. Sometimes its better to just say no and move onto the next thing. If the accountant is just suggesting people open up the SMSF due to selfish reasons that aren't in the clients best interests, don't get involved, don't get mixed up in that stuff or the PI may not cover any complaints and you will be out of the industry and maybe even bankrupt...for what a SMSF set up you charged $2,000 for.
And when the Accountant in question making the unsuitable referral happens to be the boss of the Financial Planner working within the Accounting practice- interesting times. "Sorry boss, I think your recommendation isn't in the clients best interest so I'm going to refuse set up a SMSF for this client". Should end well!
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