With the new SMSF licensing rules now in place, what are the potential risks for unlicensed accountants who continue to provide SMSF advice? To find out, we spoke to Count Financial’s CEO, David Lane.
Before the rules around SMSF licensing changed on 1 July this year, ASIC had given accountants a generous three-year transition period to become licensed SMSF advisers under the new regime.
But during that time, surprisingly few took action. Of the 32,000 or so accountants in public practice in Australia who service SMSFs, 1,500 are now operating under a limited licence and 4,000 are authorised representatives of a licensee, which leaves around 26,500 who can no longer legally advise clients on self-managed super.1
According to David Lane, CEO of Count Financial, this limited response to the new requirements could jeopardise some accountants’ businesses. Here’s what he had to say.
Why do you think so many accountants still haven’t registered for SMSF licensing?
The industry is currently in a period of significant change. A lot of accountants are under margin pressure as their regular compliance work starts to be outsourced, either digitally or to offshore providers.
At the same time, the new SMSF regulatory requirements forces them to put down their day-to-day work and take on extra education. So some accountants may have seen it as a burden rather than an opportunity, and had hoped the licensing issue will go away – which of course, it won’t.
On the other hand, some accountants are thinking in a very astute way about how to drive their business forward and provide value-added services to their clients. They recognise financial advice as an opportunity to help take care of their clients’ more complex needs, and they see education as an investment in that opportunity.
What will be the consequences for accountants who haven’t become licensed?
As it’s now a criminal offence, it’s not just that they could be banned from providing advice. They could also face a financial penalty and be prohibited from being a company director. And that’s before you consider the ramifications from accounting bodies like CAANZ or CPA — anyone who’s banned from providing accounting services could lose their livelihood altogether.
If an accountant didn’t become licensed by the deadline, what are their options now?
First of all, they need to make sure they don’t establish any SMSFs or provide SMSF advice while they’re unlicensed. If they want to keep working in the SMSF space, a temporary solution could be to partner with a financial adviser and outsource their SMSF work while they undertake the training to get licensed themselves.
But remember, it takes around six months to become authorised and complete all the education requirements. So the challenge for those accountants will be to find a short-term arrangement with an adviser they trust while they work towards a longer-term solution.
Accountants who are still unsure which way to go should also consider if they’re actually doing enough SMSF work to get licensed at this point. If they’re only doing one or two SMSF transactions every year, it might make sense to just outsource their SMSF work as the need arises.
If individual accountants aren’t doing the right thing, how could this impact the profession overall?
Research shows that accountants are the most trusted subsector of the financial services industry.2Accountants have done a terrific job in gaining that trust from their clients, However if the many accountants who currently provide SMSF advice outside of the regulated financial advice environment, they will jeopardise the reputation of the entire industry.
For accountants who have already met their licensing requirements, now is the time to spread the word and make sure others understand the significant risks of operating without a license both to themselves and to the broader industry.
How can licensed accountants encourage their unlicensed peers to take action?
Accountants are very well-networked; they don’t see their peers as competitors, but as a profession that works together. So as an industry, we need to help bring forward those who haven’t made the move yet — and that means showing them what the opportunity looks like. Once accountants understand how they can support their clients in more meaningful ways which in turn will enable them to drive further revenue for their business, it becomes a much easier decision.
Since accountants have so many clients who trust them, they’re ideally positioned to offer financial advice. And if they can make the shift effectively, accountants have the potential to become the premier financial advisers within the industry.
But at the end of the day, these accountants need to make their own decisions — and it’s up to the industry to support them however we can.
1 Investment Trends, estimates modelled from several sources, 2016.
2 Roy Morgan, Image of Professions Survey, May 2016.