Intra-fund advice, scaled advice and limited licensing for accountants advising on self-managed superannuation funds (SMSFs) are all at risk of losing viability under regulatory and legislative reforms such as the Financial Adviser Standards and Ethics Authority (FASEA) regime and those likely to flow from the Royal Commission.
That is the assessment of wealthdigital advice portal technical manager, Rob Lavery, who said there was a danger that the upcoming changes would place advice out of the reach of many by restricting it to those who could afford to pay thousands of dollars in comprehensive advice fees.
“Of itself, greater regulation is not a bad thing if it achieves better outcomes for consumers,” Lavery said. “It is important, however, not to lose sight of the importance of consumers having access to financial advice.”
“Intra-fund advice, scaled advice and limited licensing for those advising on SMSFs are all at risk of losing their viability under the incoming reforms,” he said.
Lavery pointed out that under the changes to the Corporations Act that passed parliament in February this year, there currently existed no dispensation for those providing intra-fund advice.
“This means that, in order to provide advice to a client that is specific to their current super fund, an adviser will need to have a degree qualification, pass a three to four-hour exam, do 50 hours of CPD a year, and new advisers will need to spend a year being mentored and supervised before they can provide advice independently,” he said.
Lavery said it was fair to wonder why an adviser would opt for an intra-fund advice role given the significant investment of time and money they would need to make to be able to provide advice.
“What’s more, will super funds be willing to wear the cost of employing any more than the minimum number of necessary intra-fund advisers? New advisers will be even more expensive as they are effectively unable to do their job for a year,” he said.
“Those currently providing advice under a limited licence face the same issues as those providing intra-fund advice, in that all the FASEA-administered changes will apply to them. This means that accountants using limited licences who wish to continue advising clients on their SMSFs will need to undertake a significant amount of further education and training, on top of their normal accounting requirements.”
Lavery said he believed such requirements might act as a disincentive to those operating under a limited licence.
“They may decide the new requirements simply aren’t worth the additional time and cost. This will leave many clients without any guidance when it comes to their SMSF,” he said.
“Specialists are also likely to feel the pinch. Under the current rules, advisers need only be trained and maintain knowledge in the specific areas they advise on, such as insurance, superannuation and managed funds. None of FASEA’s guidance to date has indicated that a similar, specialities-based training program will be in place,” Lavery claimed.