In a strongly worded submission to the PJC inquiry into adviser standards, sole practitioner accountant Keith Compton lamented the end to the accountants’ exemption, arguing that financial planners are not the most suitable professionals to be providing SMSF advice.
“No matter what rules and regulations are imposed on financial planners, I believe they will still operate in their own interest or at least push a particular line of investments,” Mr Compton wrote.
“Most accountants [by contrast] want to act in the best interests of their clients so as to minimise tax liabilities and to provide client businesses with appropriate planning advice so as to enable the client’s business to operate profitably and comply with all aspects of business law.”
Mr Compton railed against the decision to end the accountants’ exemption and introduce a limited licensing regime, arguing that accountants are much better placed to provide advice on “tax matters, including the establishment and running of self-managed superannuation funds” than “any present financial planner”.
The rules requiring accountants to become licensed under the AFSL regime make “no sense at all”, he added, arguing that professional bodies in the accounting space allow for adequate “checks and balances” to be in place.
“What is needed is for financial advisers to be degree qualified, not qualified by what is nothing more than a ‘cereal box’ qualification,” the submission adds. “If accountants in practice could retain their exemption, this removes the need to create these sub-qualifications and ensures that clients and investors at least receive advice from suitably qualified persons.”
[quote name=”wondering”]Disclosure – I am an Accountant & Authorised representative.I hear all this bleating by planners about accountants setting up SMSF for their fees, upfront and ongoing, as AJ says. Where else have you heard that statement before. I remember have you never heard of financial planners only using managed funds rather than direct shares because managed funds pay a large upfront & ongoing commission. Whereas Direct shares don’t pay any commissions.
Have you heard that Commission on investment and superannuation no longer applies? And some of us never took them anyway? Direct shares (as with every other strategy) are only applicable to some, not all! Maybe we are recommending funds because they are diversified, simple, cost-effective, have different risk profiles and are appropriate for some clients?
At the end of the day accountants and financial planners just need to work together. Both are experts. That’s in the clients best interest.
@ Wondering the issue is not so much accountants setting up SMSF, the issue is one party is required to comply with the corporations law, provide consumer protection documentation and have a reasonable basis plus have the evidence to proving they met those legal requirements. However accountants establish SMSF without providing any consumer protection documents and in addition blatantly provide investment advice contrary to the corporations law. Many like the accountant in the article are longing for the return and living in the age when bank tellers had guns and checkout chicks smoked behind the counter.
Wondering, commissions have had to be disclosed well before FOFA via the SOA so the client has known total fees applicable for quite some time now. As many have said their are some bad apples in every barrel be they accountants, planners, any profession, trade or industry but this sort of submission to the PJC does not provide any real benefit. Storm Financial utilised fees I believe not commissions, and I also note although not related to this topic were self licenced and not attached to a vertically integrated licencee.
Well said Wondering. Why are the big retail platforms trying in vain to stem the flow of funds out into SMSF? Because they haven’t worked out how they can make any money out of term deposits and direct shares. And the same goes for planners who charge a percentage rather than a fixed fee for service – they need to move with the times or get left behind.
Disclosure – I am an Accountant & Authorised representative.I hear all this bleating by planners about accountants setting up SMSF for their fees, upfront and ongoing, as AJ says. Where else have you heard that statement before. I remember have you never heard of financial planners only using managed funds rather than direct shares because managed funds pay a large upfront & ongoing commission. Whereas Direct shares don’t pay any commissions.
So before we planners start throwing brick bats at accountants perhaps you need to rethink what you have just written and how stupid and self righteous you sound. This is why planners have been given FOFA because of large undisclosed and ongoing commissions. When an accountant charges a FEE the client knows what has been done & what the cost was. Now try and apply that criteria to the commissions that financial planners receive and see how you go. Shows how short some planners memories are.
The reality is that clients don’t trust Financial Planners for obvious reasons… just like they don’t trust Lawyers and Doctors in some cases… Accountants are the highest regarded in all professions.. Therefore Accountants get asked all sorts of questions from within and outside our field… that’s the reality. And even with a financial planner involved they will still get confirmation from their accountant.. that’s the reality.. no law or regulation will change that…
I’ve witnessed first hand SMSFs being taxed at 15% in pension phase because that’s how the suburban accountant thought they were taxed (and he set it up for the clients)
Accountants the most suitable professionals to give SMSF advice??? Give me a break!! Are you kidding me?? The sole purpose most accountants set up an SMSF is for their fees, upfront and ongoing. The number of SMSF’s set up with less than $150K in them and the percentage of all SMSF’s invested solely in cash gives you a pretty good idea who’s interest the were looking out for
I love this reporting of the submission which, of course, I haven’t read in full. Yes, good old accountants and SMSF’s. (God love you good hearted souls) who have never set up a SMSF to generate compliance fees. Who set up multi-million dollar borrowing arrangements without licensing (for aged 75+ members). Who tell clients to instigate BDBN’s which only limit the way benefits can be paid, who ignore tax planning for the next generations. Who do not set-up reserves as it ‘muddies the waters’, even though there is a demonstrable benefit. Who can’t convince clients to invest (45% still in cash and TD’s) because they are not licensed to advise on alternatives. Who under-insure their trustees because they are not licensed to assess their needs, structure cover and refer them to a provider (even on a no-commission basis). Why is it so? Because you need training, because you need experience. I have all of these and specialist training in SMSF. Now I am completing Tax Advice training. Bless.
Sounds like Crompton protecting his own vested interests to lock in clients to annual SMSF tax and audit fees. What qualifications does he have in finance,estate planning,insurance, age pension and aged care planning ? Is he aware of the implications of his SMSF advice on these other areas ? and if not does he refer the clients to someone who does ?
Compton assumes all planners are “sales hacks” with limited qualifications. In fact the range of planner qualifications is no doubt normally distributed:
2.3% > 2 standard deviations below mean
13.6% > 1 standard deviations below mean
68.2% < 1 standard deviation above and below mean
13.6% > 1 standard deviation above mean
2.3% > 2 standard deviations above mean
The danger is in the fact that this fellow does not know what he doesn’t know.
He is an accountant so its ok. NOT. If he has been around long enough he will remember in the 70’s and 80’s- what the starting point was for accountants who suddenly became CPA’s. Yes- the advice industry has a way to go yet but don’t overlook those who has the experience AND qualifications and who choose to advise- not do tax etc. Anyone can present a strategy on a whiteboard-trouble is it needs to be documented –that’s the law- like Gerry – if this was possible, advice would be much cheaper and also could see 10 clients a day, sadly 2 or 3 is max if doing a good job.
It might be a minority view TD (and a stupid one) but this is not just some interview, mr compton wrote this in a submisson to a government inquyiry, so the pollies will actually be reading it, thats what makes it such a big deal. personally, i want to know what people are saying about my business and the factors that go into govt policy, thats why i read this publication.
Let’s face it. There are hundreds of stupid ignorant views and this guy is but one. I’m not that concerned about this one view but the fact that this publication selectively and I think quite deliberately chooses to print such twaddle from minority views.This type of article and many others are designed to inflame and perpetuate an argument that would have died long ago but for the need for publications like this to keep people interested. No different than mags at the checkout really. Let’s not get sucked in.
I worked in an Accounting Practice for 5 years, and saw some of the most inappropriate “advice” that sometimes minimised tax, but did not address the clients goals and objectives, risks, or overall position, and always had hefty fees.
There are good and bad accountants as there are good and bad financial planners. Let the good Accountants do their own jobs but not ours.
I agree with you Lynette. The higher education standards and better supervision should have been installed many years ago but of course the advice industry was born from insurance sales. I would be very happy to do a whiteboard strategy and invoice client for time…maybe one day that will happen but probably not in my generation of advisers. That’s why accountants can see quite a few clients in one day. If I see more than two in one day I get bogged down with compliance..is it an ROA, an SOA or just a big file note? Did I give out an FSG? Do I even want these people as clients? The jobs can’t be compared.
Accountants have for years been providing unlicensed financial advice way beyond the current SMSF exemption. I have been told directly from many accountants that they will continue to give this type of advice, of course not in writing, without obtaining the required license in the future. Maybe ASIC might want to do some shadow shopping and see how the likes of Mr Compton will stand up to the same level of scrutiny that financial planners have experienced over the past 5 years. I am also sure that their PI providers will love defending a client complaint based on a whiteboard recommendation.
Some accountants charges a large fee for an off the shelf deed, then they proceed to gouge the client for ongoing admin, tax and auditing fees for the fund – far in excess of what they might have been paying an institution.
After all this there is no investment advice, no retirement advice, no insurance advice (where owned by an SMSF). Easy to point the finger however I think a lot of accountants don’t understand the sole purpose test – it is not about tax minimisation – it is about providing for a retirement.
Advising a client to set up a SMSF to earn a fee for doing the accounting & financials.
Sounds a lot like conflicted remuneration!!!!!
Having to handle a SMSF right now that has a total of $65k in it, set up by…. an accountant! Poor client has no clue about any of her obligations and simply did what her ‘trusted, non-conflicted, professional’ (barf!) accountant told her to do. Needless to say we have referred her through an ethical accountant we deal with.
Let’s face it, all professions have dodgy mongrels just as all businesses at the end of the day are created to make a profit – it just depends on the ethics of the people in charge on how this is done.
Generic blanket statements like Mr Compton’s only highlights a level of conflicted self interest!
Gerry I have worked for accountants who are also financial planners for 15 years. There is a stark difference in knowledge, particularly tax and SMSF. I agree that accts should retain exemption. If financial planning had started on the same level (i.e. degree qualification) the industry would not be bogged down with bandaid measures such as “mammoth SOAs” to try to fix the damage caused by inferior advice and product pushing. Most accountants are quite capable of providing excellent advice via a white board !
I wonder if Keith knows how many of his “professional” colleagues minimized tax for their clients via Great Southern and Timbercorp. No SOAs and many were actually licensed to the scheme provider itself. Plenty of free trips to WA to oversee the plantations by helicopter – research of course!
Now they are busy putting kids into SMSF’s – all for the good of the client of course.
What a classic
It is clear that Mr Compton’s view is in itself a case of self-interest. Dare we hope the PJC can distinguish between rational, constructive insights/suggestions and egotistical, prejudiced submissions?
Sorry, Keith, but why the obsession with tax??
If I had a dollar for every business person I see earning $30k a year off the back of a profitable enterprise, all in the name of avoiding tax, I’d be at the beach relaxing.
Can’t borrow money, can’t insure against loss of true income because their tax return does not reflect their earning capacity or capability.
How about less obsession with tax and more obsession with growing business, wealth, super, etc.
What a gross generalisation. Having qualified and practiced as an accountant with a major firm but subsequently perusing the financial advisory discipline I have nothing but contempt for the vast majority of accountants. They are mere form fillers who do not make enquiries about the clients’ overall position and tailor advice accordingly. my experience when changing from one accountant to another was a disaster. The majority of accountants are vastly out of their depth when considering strategy or advice. Their tax expertise is very elementary. their understanding of investment strategy and risk is childlike.
I suggest this accountant stick to filing returns and preparing financial statements. Someone like me who left the profession 20 yrs ago shouldn’t be able to look at basic financials for many SME clients and be able to raise questions about issues that haven’t been addressed.
This clown is likely to fall in to this category and continue to do his clients a disservice.
My goodness. Who let this guy loose? He’s obviously got a bee in his bonnet about something.
He should come and sit with me in our practice for day.
Mr. Compton’s statements are myopic at best, and show almost complete ignorance as to how advisers go about their business. Let’s hope he doesn’t pull the same quality thought processes out when he is providing advice to his clients.
Disgraceful that so many submissions are based on self-interest. One of my clients was stitched up into a TTR scheme that was unsuitable and unworkable….by her accountant. I would have to do a Client Data Form and a mammoth SOA to do that. All they’ve done is scribble on a whiteboard and send out a rather inflated bill.