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ASIC tipped to bin limited AFSLs
In light of the scarce take-up of limited licences, their implementation issues and the minimal benefits they provide, one consultancy firm has predicted they may be completely abolished by ASIC.
Mayflower Consulting director Sarah Penn says there has been minimal interest in limited licensing by accounting firms, and among the accountants who did apply for a licence there is still widespread confusion as to what exactly constitutes financial advice and when a statement of advice is required.
“I do wonder whether ASIC in the next five years or so will actually remove the limited licence altogether because the take-up has been marginal and there’s been so many implementation issues with it in terms of how you operate under a limited licence,” Ms Penn said.
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As with other types of new legislation, there have been many “teething issues” with the limited licensing regime.
“This would be fine if it was an industry-wide thing and everyone had this new licence [because] ASIC and industry would then have to figure out how to make it work, but there’s only a few hundred licences out there,” Ms Penn said.
“I don’t think anyone at a policy level has the interest or the time to try and figure out all these teething issues, and really, there’s not very much advantage of a limited licence over a full licence.”
Mr Penn said the limited licence has failed to add any real value to the industry and resulted in “headaches instead”.
“I don’t think there’ll be much work done on it and they’ll either die a natural death or at some point someone at ASIC will turn around and say, ‘This is just causing everyone more work for no added benefit’”.
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Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
You can email Miranda on: miranda.brownlee@momentummedia.com.au
This whole thread is hilarious. If only your clients realised that you were all spending your time here bitching over each other like a bunch of teenagers who didn't get their preferred formal date, they would be off with an adviser who was spending their time doing something constructive like working out was actually best for them. I have come across this thread, this topic in fact, by mistake and I think you should all be embarrassed. Is this the way the whole advisory industry in Australia works? Look out Australians, by the looks of it.0- How did a super fund (which is a trust) all of a sudden become different to a discretionary trust or a unit trust or any other type of trust???? It's all BS. Accountants don't need this crap! The only reason I got my licence is because there is no way in the world I will hand over my clients (who trust me) to a Financial Advisor (AKA used car sales man)0
- Interesting Anonymous. It must be really inconvenient to have to demonstrate that establishing an SMSF is in the best interests of your clients. Heaven forbid you need to prepare cost/benefit analysis to justify recommending an SMSF to a client who only needs an SMSF so you can increase your fees. Shame on you. Let's not forget who the main perpetrators were for the failed agribusiness schemes. It certainly wasn't Financial Advisers.0
- Hmm... what to do?
-> Financial planners aren't as good at tax;
-> Accountants aren't suited to financial planning
-> 80% of 'Self Managed' Super Fund owners don't want to pay for formal written recommendations. They just want to be informed when making their own decisions (and maybe a 2nd opinion) and get help with safely implementing
-> ASIC thinks 'advice' must = specific recommendations in writing that consider (or caveat) 'everything' that could ever go wrong
0 - I'm, with you. Class action maybe?0
- The big banks wanted this to make the SMSF landscape more difficult to help stem the flow of funds from retail to SMSF. The notion of a limited license seems non nonsensical as some of the SOA's we have got back around CGT relief and $1.6 rollback are more dangerous than valuable as an SMSF Limited AFSL can't view the full scope of the clients financial situation which is where the value would lie. All in or none in - not this half baked rubber stamping version. Agree John - ASIC have made a motza of this whole thing and should compensate for their poor governance, lack of clarity and continued changes.0
- ASIC should just scrap the ridiculous notion that all SMSF advice is financial advice and go back to the old system that prohibited unlicensed people recommending specific products but being able to give general advice.
All this fiasco has proved is that most accountants are too smart to pay thousands of dollars to financial planning firms when they stood to make nothing out of it.0- SNARA, superannuation is a tax structure. An SMSF is a superannuation product just like a retail, industry or corporate superannuation fund product. Accountants just like to confuse the two because it works in their favour. Every super fund needs to do accounts, lodge tax returns and get audited. It's just that some super funds have robust systems behind them to provide up-to-date valuations, seamless processing and reporting. The other is a veritable cottage industry run by suburban accountants.
All this fiasco has proven is that the 'trusted advisers' are only to happy to flout the law. For many years they have complained about financial planners giving unlicensed tax advice, when they have been guilty of providing unlicensed financial product advice.0- Jimmy, a SMSF was a tax structure. It only became a financial product under the new rules.
I find it worrying that FP's criticise accountants when they do not understand what the changes actually meant to the accountants and their businesses. The baseless accusations of criminal behaviour by accountants do not reflect well on financial planners either personally or as a profession, particularly when you consider all the scandals committed by FP's.0- Anon, if thats what you think than no wonder accountants are having troubles...
And you speak as if FSR, the FOFA and now LIF have no impacts on financial planners?? Get real.
And as for FPs being engaged in scandals, lets not forget that many of the biggest scandals have been perpetrated by people who are accountants first and foremost but who also wear a FP hat as well. Most agri investments were sold by accountants to "solve" their clients "tax problems" with little.disclosure of the high comms being paid. Astarra/trio was promoted by a small group of accountants with an attached financial planning arm.0- Touche'0
- Anon, if that's what you and most other accountants think, then no wonder there is such a poor take up.
In terms of scandals, reports today in accountants daily about an accountant jailed in relation to a $2M tax fraud. And lets not forget all the accountants involved in agribusiness to "fix" clients "tax problems". Oh the schadenfreude.....0
- Time to go back to the limited exemption for accountants with the emphasis on limited. Make it very limited but let's have clarity. It was working well so why was there a need to fix something which wasn't broken?0
- George it was working well to allow accountants to provide absolute bucket loads of AFSL SMSF strategic advice, ( set up pensions, specific contributions, death benefit nominations, rollover from other super and often lose insurance with zero care ), that was way way beyond the accountants exemption and all completely illegal.
George, if you want to provide AFSL advice get used to doing AFSL compliance.0- Complete bollocks. The people who are most trusted and have the knowledge, experience and the trusted relationship with the client are prevented from advising on what they know, without getting a license to do what they know. Nor I or any accountant I know has 'lost insurance with zero care'. Required purely to keep money in industry and retail funds. Appalling.0
- I dont know about complete bollocks Philip because i see clients all the time that had funds set up via accountants who dont have any insurance because the accountant couldnt advise on it. Just gave the clients a trust deed and an ATO rollover form. Use this to rollover your existing super. Sent them off to the bank to sort themselves out with a bank account and a reminder to come back and see them post-30 June. These clients generally also have individual trustees, because "the accountant told me it would be cheaper..." , when their main aim is to look at buying property in the fund.0
- Until they changed the rules it wasn't all AFSL advice a lot of it was general advice or advice given as regards tax. The new rules seem a way to compensate FP's who were losing their income streams as trailing commissions for doing nothing were on their way out.
By any standard, the new rules are a failure.0- And you accountants can honestly say you never over stepped the old accountants exemption ? Huh huh huh that's hilarious :-)
It allowed you to open and close a SMSF but not all he other advice you provided.0- Yes I can. Based on your comment you have no idea what was allowed under the old exemption anyway, but don't let that stop you from throwing accusations around.
Can you honestly say that you never recommended a product on the basis that you or you firm would receive a fee or some other benefit for doing so? Now that is hilarious
0- SNARA, nothing is as conflicted as accountants giving advice on the establishment of an SMSF that then provides them with an ongoing income stream. You are hilarious.0
- It is a failure because accountants are finding it harder to provide advice? Clients are better protected which was one of the perceived benefits of the changes.0
- And of course no financial planner EVER recommended a product on the basis of getting an ongoing income stream. The hypocrisy is breathtaking, the lack of self awareness is hysterical.
At least accountants have to do work for their "ongoing income". Most financial planners I have seen use a "pick a product once, collect income for doing nothing strategy".0
- I understand your comments, whoever you are. There is no name attached. You have missed the point: accountants were allowed to give certain advice, no specific investments but advice which, in their opinion, was best for the client. Then the client went off to a broker to buy shares and so on. After all the accountant had a relationship with the client: no one else had that kind of relationship and trust. Would anyone trust a financial planner from a bank after the CBA fiasco, the NAB experience? And let's not go to Trio, Westpoint, Timbercorp et al. People in glass houses!!!0
- George, the issue is that if an accountant provides poor advice (or is perceived to have provided poor advice) they are now able to be taken to FOS rather than through the court system and the burden of proof for the client is lower. Some accountants provided poor advice and I know of a numerous cases where accountants provided investment advice which has turned out to be very poor (including some with immense conflicts of interest where I believe the accountant should be in jail for fraud). The legislative requirement are what they are and need to be followed or action should be taken by ASIC. An SOA and licensing is required and if you ignore legislative requirements you should be stopped from practising though the accounting bodies will of course not do this. The rules changed because some accountants gave crap advice, just as FOFA came in because some financial planner provided crap advice. In other words all suffer from the actions of a few.0
- Scott, I'm so with you on this. I remember when Great Southern were putting accountants under the Great Southern AFSL as "reps" here there and everywhere. 10% commissions all the way, free trips to WA etc etc. Seems to me many accountants over the journey have been more than happy to get "licensed" when it has been highly profitable for them to be. All in their clients best interest of course as you would expect from "trusted advisers" providing high commission products to their trusting clients.0
- George, is that trust built up over the course of several annual tax return lodgements were dubious deductions are claimed to guarantee a refund slightly larger than the fee being charged. When i've talked to my prospect clients over the years and ask them about their accounting relationships, the overwhelming feedback i'd take from it would be that their accountant was 'creative' and 'imaginative' and got them back 'heaps more' than they had when they were doing it themselves. They were never sure it was all kosher, but they were happy to 'trust' that their accountant was right. Of course the accountant always had the client sign a form that said they'd provided the accountant with all the info contained in the tax return. And in the event that it all goes bad for the client, the accountant can be reasonably safe in the knowledge that the client is more likely to blame the Tax Office (because every hates them anyway) and even if they did hold the accountant at fault, they would just point to the disclosure form the client had signed when the accountant said "just sign here" (which they did because they "trusted" him or her) and knowing full well that if the client wanted to take further action they'd need to engage a solicitor and take the matter thru the courts. The client could spend thousands to get back 10% of what it would cost them in legal fees. Unlike financial planning , there is no easy path to a FOS-like system for accounting clients with a no-win/no-cost mechanism if your case doesn't get up. Trust....its a wonderful thing.0
- And further to my comments George. When I worked inside an accounting firm as an employed planner I used to have many joint meetings with the accounting partners and clients. After one joint meeting where the partner had given the client some quite complicated advice on structuring, tax, CGT, etc i asked him if he was going to put all that into some sort of advice document like i was going to do for the super & insurance advice i was responsible for. He said "Hell no!! You can get sued if you do that. If it goes tits up, I can just say that they misunderstood what i said and implemented it wrongly. Cant do that if i've given them written instructions....." I was gobsmacked. But I'm sure George that you dont do that, all advice in writing, clearly documented instructions to clients about what you've recommended and why. He was just one of those rogue accountants and not a true "trusted professional". He was a member of both CPAA and the Insitute.....0
- You seem obsessed on documents.
When I worked as part of a financial planning firm there were meetings telling planners what funds to direct their clients into. Not that they were better or cheaper then other funds, in fact they were often worse. No, the reason they were chosen is that the firm got the biggest kickbacks from the fund manager.
This sudden concern for the welfare of the client is laughable.0- You can't legislate for ethics, the same applies in relation to accountants and financial planners.0
- Scrapping limited licences?! - and who will compensate me for the (more than 6) months of activity, learning, courses, travel and accommodation, angst and stress caused in obtaining my licence? What a debarcle! Tough on a small 2-man business with 30+ SMSFs......0
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