There needs to be a review of the financial advice framework so SMSF trustees can get affordable basic advice, as the limited licence regime hasn’t achieved its policy goals, argues the SMSF Association.
SMSF Association CEO John Maroney said that the currently advice regulatory system means SMSF trustees who want basic advice either need formal financial advice – with the significant associated costs – from a licensed adviser, or to make decisions without advice.
The SMSF Association says, in a submission to Treasury, that there are “impediments” that stop SMSF trustees from getting basic advice about their funds.
“For example, an unlicensed tax agent cannot recommend that their client disposes of an interest in an SMSF when it is clearly inappropriate for their circumstances,” said the SMSF Association.
Becoming licensed requires meeting additional education standards, and spending “considerable time and money applying for a license with ASIC”.
A limited licence has its own issues, with the take up of this option being “relatively underwhelming” and FASEA education standards which “did not consider limited licensed accounts”.
“Individuals who wish to provide SMSF services under a limited license must now be qualified to a level of a fully licensed financial adviser. The limited license regime is a legislated part of the regulatory framework that was ignored.”
ASIC does allow some exemptions from licensing for accountants, but these are “complex, blurred and do not provide protection to consumers for whom an SMSF is inappropriate or those seeking simple advice”.
“The outcomes from introducing limited licensing have not achieved their policy intent. Individuals have unmet needs, advisers face high regulatory costs and burden and accountants are strangled by regulation.”
Treasury has been conducting a review of the effectiveness of the Tax Practitioners Board (TPB), to which the SMSF Association made the submission. One option raised as part of the review would be a return to a form of the accountants’ exemption – with accountants to be able to provide “incidental” financial advice, and reciprocal arrangements for financial advisers giving limited tax advice.
The SMSF Association is not advocating for a return to the accountants’ exemption, but is calling for a review of “how basic SMSF services fit into the entire financial sector regulatory framework” so it works for both accountants and financial advisers.
“Essentially, the outcome should improve consumer protection, ensure unscrupulous advice is prohibited and ensure consumers are able to receive basic SMSF advice efficiently.”
The Association, in its submission, says this task goes beyond the remit of the review of the TPB, and needs input from other groups – including regulations, professional bodies and consumers.
“Therefore, we strongly advise that the TPB review make a recommendation recognising this issue and that Government should seek to address the issues relating to SMSF advice at an overarching level as soon as possible.”