The group carried out research with 322 accountants and found that the cohort had established a total of just 655 SMSFs in the last 12 months, which averaged out to be around two SMSFs per accountant, and assisted with 949 pension commencements, an average of about three pensions per accountant.
Respondents reported that a significant proportion of their client base were not interested in getting full advice, with 35 per cent of the new SMSFs set up in the last year not going on to get advice, while 55 per cent of pension clients also opted not to get advice.
Apricot Actuaries chief executive Jim Hennington said the lack of take-up of formal advice among SMSF clients was surprising and would make it difficult for accountants to see the value in getting a licence.
“The average number of transactions per accountant is low … at this rate it would take years to acquire sufficient practical experience in the application of the new laws and even longer to amortise the cost of acquiring and maintaining technical proficiency,” Mr Hennington said.
Respondents to the research said in cases where their client did not get licensed advice, 66 per cent said it was because the client was reluctant to get extra fees, 53 per cent said the cost of advice was too high and 51 per cent said the client did not trust advisers.
A further 83 per cent of accountants said they provided tax advice and factual information to assist their clients in at least some of cases where the client didn’t have a statement of advice.
Mr Hennington said the results revealed that limited licensing was not working as intended by the corporate regulator.
“When the accountants exemption was repealed in 2016, it appears that ASIC was laboring under a bizarre belief that SMSF trustees would trust and voluntarily choose to pay for licensed advice under a framework riven with scandal and, in relation to which, the holding of a licence provided no impediment to unethical conduct,” he said.
“If ASIC removed the exemption to improve the quality of advice received by SMSF trustees it has failed. In fact, it has increased the risk that trustees will not receive any advice other than tax advice.”
What is being missed here is the Best Interest Duty ramification when setting up a SMSF. BID was established to provide a level playing field for all financial product including SMSF. Clarity on the matter is achieved by simply asking who is receiving the fees? The accountants have not done the product comparisons between the retail / industry and the SMSF.
They forgot the part where 100% of these accountants simply wrote it was a clients request, when they fully know they provided personal advice. If these clients didn’t require advice, then why are they getting the accountant to setup their SMSF or start a pension, especially if cost was such a big factor for them? If the Actuaries interviewed the clients, one would assume they understand all their SMSF obligations, and the process & restrictions in starting a pension… You can bet they all rely on the advice of mr unlicensed accountant.
What a load of self serving garbage from Apricot Actuaries. They have failed to distinguish between advice to establish an SMSF in the first place, and additional advice around investment strategy.
The primary reason for getting rid of the accountants exemption was to stop all the illegal and inappropriate advice given by accountants to establish an SMSF. However it is clear that most accountants are still giving this advice illegally anyway, and ASIC is continuing the Medcraft policy of turning a blind eye to bad financial advice by accountants.
The lack of uptake by SMSF trustees of investment strategy advice is being used by Apricot as a deliberately distracting red herring, to try and undo the (currently unenforced) laws stopping accountants from recommending inappropriate establishment of SMSFs.
You should look at the source survey findings from Apricot. Its not about ‘additional’ investment strategy advice at all. See Apricot’s website.
Quite a few of my clients are on Service Packages” marketed by entrepreneurial accountants, for services many clients do not need at the time. My experience is that many SMEs resist these packages. The worst example I saw recently was when a mortgage broker client was offered a package with “loan advice and facilitation”, along with “bookkeeping services”. The broker’s wife ran a separate bookkeeping service, but that too was ignored.
So say the conflicted 300 unlicensed advisers.
I completed a survey in my office and 100% believe that accountants are 92% conflicted.
If these individuals didn’t want advice, then why did they go to their accountant to set up the fund? They could have done it themselves if they really wanted to DIY. I think the answer is that the accountants did not want to do the work. I can just imagine the conversation. “For $3,000 I can complete a full analysis which will involve an in-depth interview, at least 2 meetings and a lengthy Statement of Advice, or you can sign this Execution Only document for free right now and I will establish the SMSF right away. Which option would you prefer?”
Hi Jim, no doubt Financial Advice has fat to much BS red tape regulation and costs, that Govt needs to reduce urgently.
However that does not mean a return to bucket loads of Illegal AFSL Advice by Accountants like the previously massively over abused Accountants Exemption.
Only 83%… I’m surprised the percentage of “factual information” provided to commence a pension is that low.
It would be very interesting to see how much factual information was also provided in relation to re-contribution strategies.