The announcement by Government on the weekend of the proposed replacement of the accountant’s exemption with a conditional licensing framework has been claimed as an overwhelming victory for the accounting profession who argue their member’s stronger professional standing with providing strategic advice to SMSFs. It may not necessarily be a viewed shared by many within the financial planning industry, but every argument has two sides… the tax agent requirements extended for financial planners certainly didn’t sit well with many in the accounting profession. Ultimately though, the government objective of providing greater access to affordable advice can hopefully be achieved through these reforms.
The announced reforms will allow accountants the choice to either:
- apply for a new limited Australian Financial Services License (subject to holding a public practice certificate and meeting certain training requirements); or
- become an authorised representative under an existing AFSL holder
- pensions; and
- switching of super between funds
With the growing trend of ‘coach-seeker’ SMSF trustees, this revised licensing framework provides an exciting opportunity for those wanting to focus on strategic advice to SMSF trustees. This non-product advice area was something the accounting bodies (and SPAA) were lobbying for. For many practitioners, these reforms can allow them to focus on reshaping their business model to diversify revenue towards advice and progressively move away from compliance-based businesses.
The move into a licensing regime may have its challenges for accountants, but certainly shouldn’t be a barrier-to-entry to move formally into the SMSF strategic advice space. The ‘grey’ area in which many accountants operated around contributions and pensions in my view will see many look to grow this area, with ‘scaled advice’ as a potential benefactor, where the trustee/member will look for piece-by-piece advice through the SMSF life-cycle.
With the financial planning professions appetite for SMSF advice also growing, it presents an interesting time for the industry. Many planners now bypass the accounting relationship with the administration and compliance function outsourced to specialist service providers or even setting up internal admin teams. Who has the relationship moving forward becomes paramount as to who gets to provide the non-product advice to the client.
The diagram below shows the segments of the industry and where focus will be for both the accountant and financial adviser after the introduction of these reforms from 1 July 2013.
It is expected that 10,000 accountants will move into the ASIC licensing framework to continue to provide advice in the area of SMSFs. Moving these accountant’s into the consumer protection framework for SMSFs with licensing not only creates a level playing field with financial planners, but I expect it to redefine the quality of advice and lift standards across the sector.
It’s times like these you need to ask yourself – are you ready for the future of the SMSF industry?
POLL: Tell us about your thoughts on licensing as an accountant; what will you do?
Read Minister Shortens press release, NEW FORM OF LICENCE EXPANDS ACCESS TO FINANCIAL ADVICE