Investment Trends’ 2019 SMSF Accountant Report showed that more accounting practices are employing in-house advisers (48 per cent, up from 41 per cent in 2014) instead of referring their clients externally (25 per cent, down from 36 per cent).
“Rather than referring their SMSF clients elsewhere or providing financial advice services themselves, many accountants believe an in-house financial planner can most effectively service their SMSF clients,” said Investment Trends senior analyst King Loong Choi.
“Accountants with in-house expertise have had greater success in servicing SMSFs than those who refer clients externally. Currently, those with in-house planning expertise typically service more SMSF clients (71 per cent versus 45 per cent) and derive a larger proportion of their income from SMSFs (22 per cent versus 19 per cent).”
Among SMSFs looking for a new adviser relationship, the report found that what trustees value most is an advisers’ expertise in SMSFs (46 per cent), ahead of integrity (42 per cent), low fees (38 per cent) and value for money (35 per cent).
“For accountants, an SMSF specialist accreditation from a professional association can help assure clients of their ability, while at the same time equipping them with a tangible qualification and the requisite skillset and knowledge,” Mr Choi said.
Nationwide, the number of SMSFs continues to grow steadily, approaching 600,000 in 1Q 2019, according to Investment Trends.
However, the annual establishment rate is at a decade low, with 22,000 funds established in 2018 (down from a high of 43,000 in 2012).
Anonymous – read ASIC 216 again and then tell me it’s clear…. I quote from ASIC INFO 216:
“[b]Recommending[/b][b][/b] that a person acquires or disposes of an interest in an SMSF is financial product advice and requires you to be covered by an AFS licence. It is also financial product advice if you [b]recommend [/b][b][/b]that a person should not dispose of an interest in an SMSF, or that they should remain in their non-SMSF superannuation fund and should not acquire an interest in an SMSF, because this is financial product advice about a person’s existing interest in their superannuation fund.
[b]However, there are other types of advice and services you may provide without an AFS licence.[/b][b][/b] ASIC goes on to say:
You may provide advice on establishing, operating, structuring or valuing an SMSF without an AFS licence: regulation 7.1.29(5). [b]This means that without being covered by a licence, you can:[/b][b][/b]
* Provide advice on:
the practical steps that need to be taken to establish or wind up an SMSF
how to add new trustees and members to an existing SMSF
the different ways an SMSF could be structured
how to process transfers or rollovers of funds
* assist clients to complete paperwork (e.g. to acquire securities through the SMSF, as long as you do not influence the decision to acquire those securities)
* help clients to add new members and trustees to a fund or to exit a fund
* arrange to wind up an SMSF on a client’s behalf.
[b]You may also provide other relevant factual information that your client should know about establishing an SMSF [/b][b][/b](e.g. that they must have the financial accounts and statements for the SMSF audited each year by an approved SMSF auditor).
To me that all sounds like ‘personalised information/guidance’ gets a thumbs up. ASIC have not (to my knowledge) held anyone to account for getting this wrong.
[i]Does ‘advice’ just mean ‘recommendation’ or is ‘personalised information/guidance’ caught too? Nobody knows.[/i]
ASIC knows. Licensed advisers know. It’s only accountants who think that weasel words like ‘personalised information/guidance’ are an adequate excuse for making a conflicted, inappropriate SMSF recommendation. One day, ASIC will change their focus from persecuting licensed advisers to protecting consumers. When that happens accountants won’t be able to hide behind their lame excuses.
Investment Trends surveys need to be treated with care – as there is so much subtle context around what happens in the SMSF sector.
Accountants may employ in-house planners, but the number of in-house referrals to those planners is tiny. This is because most [b]self managed [/b]funds don’t want to pay for advice in the way licensed advisers are compelled to deliver it.
Also, accountants have no idea when they must refer to a licensed adviser – because the definition of ‘product advice’ is so obscure and un-intuitive to both laymen and accountants alike.
e.g. Does ‘advice’ just mean ‘recommendation’ or is ‘personalised information/guidance’ caught too? Nobody knows.
The most important thing for consumers is not whether they trust their accountant, but whether their accountant acts in the client’s best interest. If an accountant abuses the client’s trust, by putting them in an unnecessary, high cost, SMSF that generates extra admin fees for the accountant, then that accountant should be sanctioned. Bernie Madoff’s clients trusted him implicitly.
In house financial planners or a joint venture (branded as part of the accountancy practice is the obvious way to go). The clients trust their accountants and want to be able to get all their financial services from this trusted source. This also removes the need for the very expensive and time consuming limited licence for accountants. Time to get rid of the limited licence. Perhaps Sen. Jane Hume can put this on her to do list!
How are these inhouse advisers going to reconcile their personal obligations under BID and the enforceable FASEA Code when they realise most of their employer’s clients would be better off without an SMSF, and were only recommended one in the first place to generate more fund admin revenue for the accountant?
It’s much the same situation as advisers being coerced into pushing second rate inhouse product for an institutional licensee.