Stuart Abley

AMP’s SMSF Advice has debunked the commonly held view that for a typical accounting practice, the cost of establishing and maintaining a limited Australian Financial Services Licence (AFSL) is less expensive than becoming an authorised representative of another AFSL holder. 

Accountants can expect to pay from $20,000 to $34,000 for self licensing, compared to $15,000 to $20,000 for becoming an authorised representative, according to AMP SMSF Advice research conducted as accountants consider their licensing options.

Most accountants view the $1,485 ASIC application fee as their only up-front licensing cost, but in reality, licensing set up can cost accountants about $11,500, more than eight times what most accountants expect.

Many accountants are unaware they should begin business preparations at least a year in advance if they’re planning on acting under a limited licence when the accountant’s exemption is removed.

These are some of the insights AMP’s SMSF Advice has unearthed after speaking with more than 500 accountants over the past year.

SMSF Advice has unlocked six key insights into what accountants are thinking – and not thinking about – when it comes to licensing. SMSF Advice’s special report, To licence or not: The real cost of your decisions, explores the big questions facing Australian accounting professionals.

From 1 July 2016 the exemption which allows accountants to set up an SMSF without the need for a licence will be removed and accountants who want to continue doing this will need to be licensed.

Accountants have a number of licensing options, including obtaining and maintaining their own licence or becoming an authorised representative of another AFSL holder.

AMP’s Head of SMSF Advice Stuart Abley said it’s crucial for accountants to have an accurate understanding of the licensing options available and the implications of each.

“After speaking with over 500 accountants about licensing we know that the big areas of confusion for accountants are around cost and timing,” Mr Abley said.

“The question of licensing for accountants is about how, and not when – the time to act is now.

“Getting ready for licensing is a lot more involved than most accountants anticipate with preparations estimated to take well over a year, including training to meet RG146 competency requirements, collection of documentation, creating compliance procedures, understanding FOFA advice obligations and the opportunity to develop a new pricing structure.

“The choice between becoming self-licensed or an authorised representative of a licensee is an important decision and while most accountants are concerned with the cost implications of change, some are limiting their focus to costs only.

“This is a terrific opportunity for accountants to transform their business by embracing advice and benefiting from the value it can add to their practice with increased revenue and profitability and, most importantly, the opportunity to offer clients a valued service.

“The Australian SMSF asset pool is worth $530 billion and accountants who want to continue to service their clients with SMSF advice, or build strength in this growing sector, have some big decisions to make about the best way forward for their business,” Mr Abley said.

SMSF Advice spoke with over 500 accountants across Australia over the past year and landed on six key insights about accountants and their licensing journey:

• Not all licensing costs are being considered. In the first year, total up-front and ongoing management costs of holding a licence could be as high as $20,000 to $34,000, compared to costs of around $15,000 to $20,000 for becoming an authorised representative of another AFSL holder.

• Accountants need to look beyond financial costs and consider the non-financial, ongoing costs, including maintenance of the licence.  This maintenance work is often carried out by the practice partner, the highest fee earning staff member.  Accountants also need to consider their ability to absorb the risk into their business model associated with becoming self-licensed.

• The type and scope of SMSF advice accountants can give under the licensing options vary. In choosing which licensing option to take, accountants need to be very clear on the type and scope of SMSF and other financial advice they want to provide to ensure they meet all legal and compliance obligations.

• Accountants are unsure about how to incorporate ‘advice’ into their business structure. More than half of accountants are not charging appropriately for the strategic advice they give to clients, pricing it at the same level as a client’s general tax advice, rather than at a more strategic advice level.

• Many accountants are concerned they may be providing advice beyond the SMSF accounting exemption.

• If accountants want to obtain a limited licence and begin offering advice by July 2016, they need to be taking active steps during 2014. Most accountants are unaware that if they are planning to act under a limited licence, they should begin preparing their business at least a year in advance, including undertaking the RG146 training, time for collecting and collating licensing documents and business preparation.

My Abley said the most important question accountants should be asking themselves is, “How do I transform my accounting business now so it remains relevant in the future”, and licensing is an important first step in this opportunity to focus on future growth.

The post AMP finds out what accountants are thinking about licensing appeared first on AdviserVoice.

Accountable director David Moss said the restrictions imposed on the Accountants AFSL will hamper accountants’ ability to service their clients and it will be costly and complex to administer.

“We do not believe that many accountants will go down the path of applying for their own licence,” Mr Moss said.

The Minister for Financial Services & Superannuation, Bill Shorten last week released draft regulations removing the Accountants’ Exemption on SMSF advice. It included the introduction of a “streamlined” Australian Financial Services Licence (AFSL) option for accountants from 1 July 2013.

Mr Moss said for most accountants, joining an existing AFSL would be the simpler and more cost-effective option. “By their own estimates, the Government has stated that the initial and ongoing costs of operating an “Accountant’s AFSL” to be between $10,000 and $20,000 per year,” he said. “Also, the majority of accountants have never been licenced previously and have little experience and knowledge of how a financial services licence works on a day to day basis”.

Accountable Financial Solutions is one of several AFSLs who now cater for accountants who are seeking to provide advice to their SMSF clients.                                                                                                    

The proposed Accountants AFSL would likely prove too restrictive for accountants looking to provide their clients with an adequate level of service. Mr Moss said it would allow accountants to provide “financial product advice” on SMSFs, however, it did not specifically address what areas of SMSFs accountants could advise on; for example, areas such as contributions, rollovers, borrowing arrangements, lump sums and pensions.

It will also allow accountants to provide “financial product advice on superannuation” already held by a client but only in consideration of a client establishing a SMSF, making contributions or starting a pension. There is no indication in the current proposal as to whether this covers other areas such as roll-overs.

In other areas, including superannuation (for example, clients in personal and corporate super plans), Term Deposits, Managed Funds, Shares and Insurance, accountants will only be able to provide “class of product advice” (or general advice), with no mention of specific products or securities.

“Our view is that the draft regulations and the new Accountants AFSL fail to provide accountants with a way to effectively meet the demands of their clients,” Mr Moss said.

“Accountants want to be able to advise their clients on all matters associated with SMSFs, including setups, contributions, roll-overs/super consolidation, borrowing arrangements, lump sums and pensions. And, clients expect their accountants to provide this advice.”

Accountants who choose to apply for the Accountants AFSL or become licensed under an existing AFSL will be required to meet ASIC’s minimum Regulatory Guide 146 (RG146) training requirements.

Accountable is advising accountants to firstly ensure that they meet ASIC’s minimum training requirements under RG146. Accountable estimates that over 80% of accountants do not currently meet the minimum RG146 requirements.

Accountable also advises accountants looking to join an existing licensee to do their homework before they choose. “There are few licensees out there that have been developed by accountants for accountants”, Mr Moss said.

Mr Moss said that Accountable was the only non-institutionally owned licence that was solely focused on licensing and training accountants.

The post Proposed Accountants AFSL won’t win over the profession appeared first on AdviserVoice.

Much of the discussion is merely hypothesis.

The reality is that financial planning and the financial services industry more broadly have not done a good job of managing relationships with accountants.

Why is this?
Historically, four issues have generally plagued the relationship between accountants and financial planners:

• Trust
• Client ownership
• Expertise
• Sharing revenue streams and costs

More recently, independence has become a major issue, in particular, independence from major financial institutions.

The majority of accountants in practice, and we’re talking over 90% of accountants, are not involved in the provision of financial services.

They are certainly involved in superannuation and self-managed superannuation funds (SMSFs), but this is largely in the form of providing advice on the most appropriate tax structure for a client. An SMSF generally forms part of this tax structure.

The changes announced by Minister Shorten will see, over the next three years, a number of accountants moving into the provision of financial services and advice.

Our expectation is that accountants will become authorised to provide advice, in a limited or restricted form, in superannuation and SMSFs.

Do accountants want to expand their advice capability into other areas such as investment and life insurance advice? Our research indicates that the majority will not.

Would accountants prefer to work with financial planners who offer advice across a range of specialisations such as life insurance, investments and retirement planning? Preferably, not.

So, where is the opportunity for financial advisers?
Firstly, it is worth noting that there are over 60,000 accountants in practice in Australia. That’s a big market!

Secondly, there are two very clear opportunities for advice, particularly for advisers specialising in:

• Investment advice, particularly on direct assets (e.g. Australian shares), and
• Life insurance specialists.

The ATO introduced measures on 7 August 2012 as part of the suite of measures announced within Stronger Super. These measures are intended to address potential risks and strengthen the regulatory framework in which SMSFs operate.

These measures mean that trustees of an SMSF, are:

• Required to conduct a review of the fund’s investment strategy on a regular basis
• Required to consider insurance for fund members as part of the fund’s investment strategy
• Required to value the fund’s assets at market value for the purposes of preparing financial accounts and statements.

From our research and discussions with a large number of accountants, a clear preference has emerged to work with specialists in their respective fields.

For example, most accountants manage the day to day administration of SMSFs for their clients. They do not manage the assets within the SMSFs and are generally not authorised to advise on investments, asset allocation and portfolio construction.

The most recent SMSF statistics released by the ATO to the end of March quarter 2012 shows that the majority of investments invested in SMSFs are direct assets such as Australian shares, cash, term deposits and property, both commercial and residential.

The table below outlines the asset allocation of SMSFs as a whole as at March quarter 2012.

Direct investment accounts for over 75% of the total assets of SMSFs. Only 5% of the total assets are invested in managed funds.

SMSF members clearly have a preference for direct investment rather than through an investment platform.
Is the SMSF asset allocation appropriate to the needs and risk profile of SMSF members? Maybe. Then again, no one has tested this. The SMSF may be concentrated in direct property and it is debatable whether this would meet the ATO requirements for diversification.

A trusted relationship with an accountant may give you access to valuable information on a fund’s asset allocation.

Investment specialists, particularly in direct shares and portfolio construction, have a genuine opportunity to assist and advise the SMSF clients of accountants on the most appropriate portfolio for their clients.

In terms of insurance, a recent study indicated that over 90% of SMSFs were either underinsured or did not have life insurance.

The ATO statistics indicate that the average number of members in an SMSF is two. Let’s call them “mum” and “dad”. Both will need advice on the most appropriate type and level of insurance cover.

Specialist advisers in life insurance – those with 10 or more years’ experience advising in life insurance – would add significant value to an accountant’s clients in assessing their current insurance coverage, through other super funds or outside of super.

The challenge, though, is not just for financial advisers. The challenge needs to be laid down to accountants as well. By not expanding into financial services they may be missing out on valuable opportunities, not just to increase the value of their business but also to provide greater assistance to their clients in growing and protecting their wealth and retirement savings.

This article first appeared in the September issue of the van Eyk View. 

http://itunes.apple.com/au/app/the-van-eyk-view/id476210180

The post Advisers and accountants can work together appeared first on AdviserVoice.

“Premium was founded by accountants and alignment with accountancy practices and principles have always been central to our business,” he said.   “Accountants are among the most trusted professions.  And as we know, sadly advisors still do not have the perception of trust they merit.   We think that many of the other initiatives introduced via FOFA will only have a small impact on rebuilding this trust in the eyes of the community.

“We believe this new accountant’s licencing initiative will increase the uptake of advice and help move financial advice into the status of a profession.

Mr Harding-Davis said it was a natural progression for the firm to offer licencing to accountancy firms.

“We will offer the three tiers of licencing and the support services that go along with it, such as monitoring, audit and training.  Additionally, accountants will need to be RG146 compliant, so we will provide access to the necessary training packages, along with a sensible pricing model.”

“We also believe the referral opportunities this will create will be of significant value for the advisors in our network. We think it’s unlikely that all accountants will want to get involved in the specific investment or insurance product decisions by clients, so reliance upon the knowledge of advisors will be essential in this regard.”

The step by Premium is the latest initiative in an active growth strategy.

“We have recently increased the number or advisors in our network and are in discussions with a number of others. We also recently announced that we have formed an alliance with The Emerald Club to provide licensee and dealer group support for members.”

“We think this latest initiative will further enhance the attractiveness of our Group for firms who wish to remain free from institutional imperatives.”

The post Accountant licencing most positive FOFA-initiative appeared first on AdviserVoice.

“Some people in the industry have painted this as future accountants versus financial planners’ showdown,” said Malley, who was one of the headline speakers at today’s No More Practice Live Event in Sydney. 

“We don’t see that at all. The vast majority of our members do not wish to provide product advice and want to establish professional referral networks to other ‘trusted advisers’”. 

As accounting clients become more financially literate or if they are in need of a specific product recommendation, he said business relationships formed between accountants and the advisers will play an important role in servicing such clients. 

Under FoFA, accountants will be able to provide limited financial advice and Malley acknowledged that there had been some jostling for the advice space from a number of different sectors – however, what is best for the consumer can almost get lost in the process, he said. 

Advisers and accountants need to acknowledge their differences and proactively build relationships, he said. 

“There is no point in building relations at the eleventh hour when governments are talking about policies, often on the run,” he said. 

“If we have an agreement to disagree on some fronts, but overridingly a healthy respect for collaboration, we have a much better chance of being strategic as a sector.” 

“Small territorial issues” would most likely be resolved by market forces and Malley said it was important for accountants and advisers to focus on opportunities and drivers to collaborate more often.

The post Adviser-accountant showdown over FoFA misguided appeared first on AdviserVoice.

Under current laws, accountants can provide advice on SMSFs without having to hold an Australian Financial Services Licence, but the proposed removal of the exemption under the FoFA guidelines will force accountants to obtain an AFS licence if they want to continue to provide advice around SMSFs and superannuation.

Philippa Sheehan, Managing Director of My Adviser, said that she was very pleased to be able to offer accountants a comprehensive solution to the changes.

“The package we have developed will go beyond existing legislative exemption. It offers Professional Indemnity Insurance to accountants and will also allow them to provide some strategic advice to clients on SMSFs, including on basic deposit products and cash management accounts.
“Our package is competitively priced, with a flat fee and the option of a weekly payment for Professional Indemnity Insurance and on-going support and education,” Sheehan said.

With the Institute of Chartered Accountants estimating that up to 10,000 accountants will be looking to take advantage of the current legislative changes to move into the sphere of SMSF advice, there is a significant opportunity for accountants to licence themselves sooner rather than later.

“At My Adviser, we feel very strongly that accountants should be able to get the correct licencing easily. We have no links with any bank or insurance company, and we see this as a competitive advantage as institutional aggregation continues in the industry.

“Better informed investors are increasingly seeking out services that are free of ‘product manufacturer’ influence, and our accountant licensing package will help accountants provide that unfettered advice,” Sheehan said.

She concluded by saying how important it is that accountants know there is an independent alternative in the market.

“Accountants don’t need to go through the licensing process alone, and they don’t need to align themselves with a large institution to get licensed. A non-aligned group, like My Adviser, is perfectly positioned to help accountants move their business forward successfully,” she said.

12 July 2012

The post My Adviser announces Accountant’s Licensing Package appeared first on AdviserVoice.

The Self Managed Super Fund Professionals’ Association has today predicted a year of clarity for the SMSF sector on issues such as limited recourse borrowing, replacement of the accountants’ exemption and new rules for holding collectables in SMSFs. In new issues, SPAA expects greater Australian Tax Office focus on SMSFs which are paying pensions, while SPAA intends to look for ways to help SMSFs better access wholesale investments.

In a keynote address to the SPAA National Conference in Brisbane today, on key legislative and technical issues impacting on the SMSF sector, SPAA National Technical Director Peter Burgess said SPAA was also optimistic about a resolution to the excess contributions tax issue this year.

“We see 2011 as a year of consolidation following the Cooper Review and consultations on the Future of Financial Advice (FoFA) reforms,” Mr Burgess said.

“We look forward to clarification of the limited recourse borrowing rules, in particular, to a softening in the ATO’s interpretation of them. Currently, SMSFs can only borrow against a ‘single acquirable asset’ and asset improvements are banned. The Queensland floods highlighted the inflexibility of these rules and, unless changes are made to them, or to the ATO’s interpretation, it is difficult to see many SMSFs using them,” Mr Burgess said.

Mr Burgess told the conference that SPAA hopes that some relief will be granted to SMSF investors who have inadvertently contributed in excess of their contribution caps.

“SPAA has already recommended that excess contributions made in error by SMSF members be refunded and that those at risk of excess concessional contributions be allowed to opt out in advance in certain situations.”

Mr Burgess said the introduction of new rules governing collectables and personal use assets from 1 July 2011 are likely to have a significant impact on how those investments are acquired and held by SMSFs.

However, he noted that the government had last year signalled its approval of the SPAA Guidelines on valuing, auditing and documenting of artwork and collectables in SMSFs.

“SMSF auditor registration and auditor independence, as recommended by the Cooper Review, are also likely to be important issues, along with the accountants’ exemption and what will replace it,” he said.

Mr Burgess said a “sleeper issue” for SMSFs this year is the expectation of greater Australian Tax Office attention on SMSFs paying pensions. Fund assets supporting pension payments are tax exempt. The ATO would likely focus on ensuring that only SMSFs entitled to, claim this exemption.

A new issue for SPAA and SMSF investors is how a SMSF trustee might gain access to a wider range of investments through access to wholesale investment markets.

“An issue which has been on SPAA’s radar for some time is the current distinction between wholesale and retail investors and we are pleased to see this issue being discussed as part of the FoFA reforms.”

“SPAA believes existing rules cause confusion and restrict the ability of trustees to access investment opportunities. At the same time, SPAA is keen to ensure SMSF trustees retain consumer protections under the law,” Mr Burgess said.

The post SPAA National Conference: SPAA predicts year of clarity for SMSFs appeared first on AdviserVoice.

The Self-Managed Super Fund Professionals’ Association of Australia (SPAA) has today welcomed the Federal Government’s response to the Cooper Review recommendations on the $409 billion self-managed superannuation sector which include no additional investment restrictions for SMSFs, higher standards for SMSF advisers and consideration of a ‘restricted licence’ arrangement for accountants who provide limited superannuation advice.

“The minimal Government measures announced in response to the Cooper Review for SMSFs are further confirmation that the sector is performing well and does not need significant intervention or overhaul,” said Sharyn Long, SPAA Chairman. “SPAA believes SMSF investments should be free from government intervention as far as possible.”

“We are particularly pleased the Federal Government has listened to our feedback and has decided not to impose additional restrictions on where or what SMSFs can invest in,” Ms Long said. “We particularly note the Government’s comment that there is no evidence that current in-house asset investment rules have caused any “detriment” to SMSFs.”

The Cooper Review recommended that the 5% in-house asset limit be removed so that no IHA investments be permitted and that SMSFs with existing IHA assets be given five years to exit them. An early version of the Cooper report also recommended that artwork and collectables be banned as investments in SMSFs too, but in July the Government endorsed a set of best practice guidelines for collectables in SMSFs developed by SPAA and the Australian Artists Association and this has been retained.

Ms Long said SPAA endorsed the ASIC registration requirement for SMSF auditors, but said more information was needed on the detail, in particular on the proposal that the Australian Tax Office police SMSF auditors. “However, SPAA is very pleased the Government has announced a review of the Cooper Review recommendation on SMSF auditor independence, as we believe it is unworkable in its current form.”

“We note that the Government has referred the accountants’ exemption issue to the Future of Financial Advice reform process, but its response suggests the door remains open for the use of a restricted licence
for accountants who provide non-investment advice on superannuation,” Ms Long said. She noted that the Cooper Review had recommended a full Australian Financial Services Licence replace the
accountants’ exemption.

She said SPAA supported the Cooper and Government move to develop an SMSF specialist knowledge component of advice standard RG146 because there was a need to improve this basic standard for superannuation advice.

“We have argued in our Cooper submissions that the SPAA Specialist Auditor (SSAud) and SPAA Specialist Advisor (SSA) accreditations be used as the basis for improved advice standards in the SMSF
sector,” she said.

SPAA has also been assisting the ATO on measures to reduce instances of fraud and illegal early access and endorses the Government’s move to require verification of identity and other checks.

On issues of concern, Ms Long noted that the Government had rejected a Cooper recommendation to allow the ATO to issue binding rulings in relation to SMSFs.

“We are disappointed the Government response to Cooper has ruled out the use of Australian Tax Office binding rulings in relation to SMSFs, as we believe such rulings can provide clarity and certainty for SMSF
trustees,” said Ms Long.

“We look forward to participating in the Government’s consultative group and sub-groups on the implementation of the Cooper reforms that it has adopted.”

The post SPAA welcomes rejection of additional investment restrictions for SMSFs appeared first on AdviserVoice.

More than 800 members of The National Tax & Accountants’ Association (NTAA) attending a seminar in Sydney have expressed overwhelming support for the launch of the new NTAA Financial Planners Association.

The NTAA comprises 7,500 firms of tax agents and accountants who act on behalf of more than 6 million Australian taxpayers.

Head of the Financial Planning Association of Australia (FPA) Mark Rantall, earlier dismissed the new financial planners association as of little consequence, which represents no threat to the FPA.

“Since the NTAA’s clients represent the majority of the 426,000 self managed superannuation funds (SMSFs) in Australia, Mr Rantall’s critical comments are hard to understand, “ said Andrew Gardiner, NTAA’s Senior Taxation Manager.

“It’s not surprising that the FPA are dismissive of a new financial planners association. They have dominated the market for too long, and have become used to dictating to people wishing to establish SMSFs.

“The NTAA believes that the public perception of financial planners is exceptionally poor, and that they are in the pockets of large financial institutions,” said Mr Gardiner.

“By contrast, accountants and tax agents are the trusted advisers to their clients, who know they can rely on their advice as being totally focused on their clients’ financial needs.

“The NTAA Financial Planners Association will offer taxpayers much more choice, and many more financial investment options.

“But this issue is not all about gaining a larger slice of the financial planning market.  It is about providing honest, ethical advice to hard working Australians who need to maximise their retirement savings.”

“Many of our members at our Sydney seminar have indicated that they will need to re-think their business and move into the space which the new association has created. Either that, or they risk losing their business,” added Mr Gardiner.

“The FPA claim that they are a professional association. To me, that seems strange, coming from a body that merely oversees financial planners, more than 80%  of whom are tied to large financial institutions.

“The NTAA represents a profession which is clearly perceived as honest – we are not planners tied to large institutions, who are the financial equivalent of used car dealers.

“And that is why accountants and tax agents will be able to step into this space, offering their clients highly ethical financial planning services with honesty and integrity”.

The post NTAA Hits Back At Criticism From the Financial Planners Association of Australia appeared first on AdviserVoice.