Has the fight for the SMSF key adviser seat has just begun?

The announcement by Government on the weekend of the proposed replacement of the accountant’s exemption with a conditional licensing framework has been claimed as an overwhelming victory for the accounting profession who argue their member’s stronger professional standing with providing strategic advice to SMSFs.  It may not necessarily be a viewed shared by many within the financial planning industry, but every argument has two sides… the tax agent requirements extended for financial planners certainly didn’t sit well with many in the accounting profession.  Ultimately though, the government objective of providing greater access to affordable advice can hopefully be achieved through these reforms.

The announced reforms will allow accountants the choice to either:

  • apply for a new limited Australian Financial Services License (subject to holding a public practice certificate and meeting certain training requirements); or
  • become an authorised representative under an existing AFSL holder
The extension to SMSF advice will see accountants be able to provide advice not only in respect to the fund establishment, but will allow for advice on:
  • contributions
  • pensions; and
  • switching of super between funds
Further extensions with the conditional licensing framework around class of product advice have also been provided to allow for advice on superannuation products, securities, general and life insurance, simple Managed Investment Schemes, and bank deposit products.
How will win the battle of SMSF advice?

With the growing trend of ‘coach-seeker’ SMSF trustees, this revised licensing framework provides an exciting opportunity for those wanting to focus on strategic advice to SMSF trustees.  This non-product advice area was something the accounting bodies (and SPAA) were lobbying for.  For many practitioners, these reforms can allow them to focus on reshaping their business model to diversify revenue towards advice and progressively move away from compliance-based businesses.

The move into a licensing regime may have its challenges for accountants, but certainly shouldn’t be a barrier-to-entry to move formally into the SMSF strategic advice space.  The ‘grey’ area in which many accountants operated around contributions and pensions in my view will see many look to grow this area, with ‘scaled advice’ as a potential benefactor, where the trustee/member will look for piece-by-piece advice through the SMSF life-cycle.

With the financial planning professions appetite for SMSF advice also growing, it presents an interesting time for the industry.  Many planners now bypass the accounting relationship with the administration and compliance function outsourced to specialist service providers or even setting up internal admin teams.  Who has the relationship moving forward becomes paramount as to who gets to provide the non-product advice to the client.

The diagram below shows the segments of the industry and where focus will be for both the accountant and financial adviser after the introduction of these reforms from 1 July 2013.

It is expected that 10,000 accountants will move into the ASIC licensing framework to continue to provide advice in the area of SMSFs.  Moving these accountant’s into the consumer protection framework for SMSFs with licensing not only creates a level playing field with financial planners, but I expect it to redefine the quality of advice and lift standards across the sector.

It’s times like these you need to ask yourself – are you ready for the future of the SMSF industry?

POLL: Tell us about your thoughts on licensing as an accountant; what will you do?


FOFA to deliver a new world of SMSF advice

Depending on who you are listening to and what financial services news you read each day, you can easily get confused whether the Future of Financial Advice (FOFA) reforms are going to decrease or increase the number of financial advisers.

Whilst we may see the exit of many advisers who will find it simply too hard and too late in their professional lives to re-wire their businesses, we are going to see an influx of SMSF strategic advisers via the accounting profession.  With the details of the accountant’s exemption replacement due very soon (possibly as early as next week), it is my understanding that we could see up to 20,000 public practitioners entering the proposed conditional licensing regime to be able to provide advice (non-investment) to SMSF clients.  As always, the ‘devil will be in the detail’, which we eagerly await to see.

In my view, with these sort of numbers potentially moving into the advice space, we are going to see some ‘jousting’ for the key adviser seat.  With many self-directed SMSF trustees simply looking for strategic guidance around life events (i.e. what is being proposed through the scaled advice reforms) rather than wholistic advice, it will be fascinating to see how this plays out as moving forward this advice will most likely be available through either a financial planner or licensed accountant.  Regardless of the whether it is predominantly the adviser or accountant sitting in the key adviser seat, this is ultimately a positive outcome for SMSF trustees as professional competency improves in this area. (advisers becoming SMSF specialists).

With the SMSF industry expected to grow to more than $2 trillion dollars by 2030 (see Deloitte Actuarial Report – Dynamics of the Australian Superannuation System, The next 20 years: 2011–2030), the opportunities within the sector will continue to grow as it matures further.  Remember, the SMSF as an industry (under the ATO umbrella) has only been around since 2000.  It is staggering to see the grow achieved by the section in such a short period of time.

I expect FOFA will deliver on its promise to increase competency in the area of SMSFs.  For those wanting to get involved or take a more active role with their business in the sector, you need to ask yourself are you ready for the future of the SMSF industry?

Stronger Super: The impact for SMSFs – webinar now uploaded

I have now uploaded the webinar recording of this afternoon’s special session on the impact of the Stronger Super reforms.

These reforms announced by the government last week were in response to the Cooper Review (Super System Review) recommendations submitted to government on 30 June 2010.

Click here to watch this webinar, or alternatively download from the Box on the right hand side of the page.

Wishing you a Merry Christmas and a Happy New Year.  I look forward to sharing more with you in 2011.

Cooper Super now Stronger Super – the impact for SMSFs

Santa, or should I say Minister Bill Shorten has delivered a Christmas gift a little early this year with the Government’s response to the Super System Review (Cooper Review).

The government’s response, known as “Stronger Super” has provided support, or in-principle support for 139 out of 177 of the Review’s recommendations.

Much of the mainstream media focus is on MySuper and to a lesser extent, SuperStream.  Self-Managed Super Funds as we know were a significant part of Phase Three of the Super System Review, and in today’s release address the 29 recommendations impacting SMSF trustees and the profession.

I have tabled below the Super System Review recommendations into those that are supported and note supported:

8.1 No change to the current membership limit of 4 members
8.2 Introduction of sliding scale penalty system for ATO as Regulator
8.3 Greater powers for the ATO to issue directions regarding specified contraventions
8.4 Mandatory education for trustees who have contravened SIS legislation
8.6 Development specialist SMSF component to RG146 to increase knowledge and competency of licensed advisers
8.8 Approved Auditors to be required to be registered by ASIC, including initial and ongoing assessment of competency
8.9 ASIC to develop approved auditor independence standards (in conjunction with industry)
8.10 Review of the ability to borrow within superannuation in 2 years’ time
8.15 Mandate for ATO to collect and produce SMSF statistics
8.16 SMSFs to value all assets at their net market value
8.17 ATO to assist in publishing valuation guidelines for consistency and standardisation of practices within the industry
8.19 Removal of additional administrative burdens that are unnecessary
8.20 Greater identification measures for people joining SMSF, whether setting up or joining an existing fund
8.21 Capture of provider information regarding advice in setting up SMSF
8.22 Introduction of some naming protocols for SMSFs
8.23 Improved processes to allow more efficient rollovers into SMSFs from APRA regulated funds
8.24 Introduction of criminal and civil sanctions around illegal early release scheme promoters
8.25 Non-complying tax rate to apply to illegal early access amounts
8.26 Rollovers into SMSFs to be captured by AML/CTF Act
8.27 Amend SIS Act to allow for automatic deeming with SMSF trust deeds (no need to upgrade)
8.28 Create a SIS operating standard to require separation of fund assets
8.29 Amend investment strategy operating standard to consider life & TPD insurance
Support in Principle
8.13 Removal of exception to transfer listed shares off-market / where underlying market exists, must sell personally and then purchase within fund.  Property to require independent valuer report to be prepared.
Not Supported
8.5 No introduction of binding ruling system for SMSFs
8.11 Credit providers will not collect and provide information about levels of finance in SMSFs.  Will be captured by ATO in their data collection process.
8.12 No change to the current In-house asset requirements
8.14 No change to SMSFs being able to hold artwork and other collectibles
8.18 No change to the member reporting requirements for an SMSF
8.7 Removal of Accountants’ Exemption and requiring an adviser to hold an AFSL to establish a fund.  This issue is being considered under Future of Financial Advice, and potentially includes a restricted licensing framework.

This appears to be a great result for the SMSF industry and in particular for fund trustees.  SMSFs will continue to be set apart from alternative superannuation structures by their diversification in investment choices, which will continue to include in-house assets, and collectibles (even though they make up a very small overall percentage of SMSF total assets).

These changes are going to involve some costs to the ATO and ASIC.  As a result, these costs will be offset through an increase in the annual SMSF supervisory levy (currently $150), with effect from this financial year (2010-11).

Where to from here?

The government will now look to establish an SMSF sub-group from the overarching consultative group in early 2011 to progress the implementation of these SMSF reforms.  Initial consultation will focus on detailed design and implementation issues, with subsequent consultation on exposure draft legislation.

Most measures are intended to take effective from 1 July 2012.  Tighter legislative standards for investments in collectibles and personal use assets will apply to new investments from 1 July 2011, with all holdings of these asset types to comply by 1 July 2016.  AML/CTF changes will take effect from 1 July 2013 and amendments to the registration process will commence on 1 July 2014.

Join us for a special webinar on the impact of these reforms

Given the importance of these changes, I have decided to run a special webinar event next Tuesday, 21 December 2010 at 4pm ESDT.

Click here to read further details on this event.

Space is limited.
Reserve your Webinar seat now at:

Reflecting on the year that was 2010…

Tis’ the season to reflect on what has been a big year for self-managed super funds and the financial services industry as a whole.

The year started with a bang, with Phase Three of the Super System Review on Structure including Self Managed Super Funds.  This phase of the review was arguably the most debated with industry funds and the retail sector pushing for mandatory education of trustees, amongst other things.  The statistical summary ordered by the Chair of the Review, Mr Jeremy Cooper seemed to lay to rest many of the myths around people abusing the privilege of an SMSF.  The final recommendations noted that the SMSF industry was robust and in fairly good shape.

With the final recommendations handed to government on 30 June 2010, the question remained when the government would look to action any of these recommendations (I say “any” instead of “many”, given the handling of the Henry Tax Review, where the government announced to implement 2 out of 138 recommendations).

It is good to see however, the industry and regulator starting to already address some of these key recommendations, including the introduction of the ATO member verification system to rollover monies from an APRA regulated fund.  We are also seeing industry recognition of the need to increase competency requirements for advisors, accountants and auditors within this specialist superannuation field (and hence my decision to create The SMSF Academy).

NB. Minister Shorten is expected to announce this week their response to the Super System Review recommendations.

From the Ripoll Enquiry came the announcement of the Future of Financial Advice reforms.  FoFA as it is now more commonly known, also integrated some of the key recommendations from the Cooper Review, including the removal of the Accountant’s Exemption.  The basis for these reforms are to improve the trust and confidence of investors (including SMSF trustees) in the financial planning sector, and are designed to tackle conflicts of interest that threaten the quality of financial advice provided.

This week has seen the first meeting of the advisory panel to tackle the FoFA reforms.  It will be interesting to see how much we actually hear on some of the key issues, with the panel members being asked to keep discussions strictly confidential.

It was pleasing to see recently a common sense approach by the Accounting Professional and Ethics Standards Board (APESB) to defer the introduction of APES230.  This standard was to impose fee-for-service only for financial planners that were members of a professional accounting body (CPA, ICAA, NIA) from 1 July 2011.  This has now been deferred, subject to the direction of FoFA.

Australia’s Future Tax System review, chaired by Dr Ken Henry turned into arguably the “fizzer of the year”.  From a super perspective though, the government announced some important reforms around a ‘fairer super system‘, including the progressive increase of super guarantee contributions to 12%.  The catch here of course for the super industry is we are never forever entwined with the resources sector and the super profits tax.

As a result of these key announcements, the Federal Budget was a low-key affair, with reiteration of the many announcements about a fairer super system the week before.

The year also saw a federal election.  Whilst there was no change to government, there was a promotion for the very well-regarded Minister Chris Bowen into the key portfolio of immigration from his superannuation and financial services post.  There was some trepidation about the appointment of former Secretary of the Australian Worker’s Union (AWU) and Australian Super (industry fund) director, Mr. Bill Shorten.  Time will ultimately dictate the legacy he leaves behind on the superannuation and financial services sector.

I commented earlier this year in a meeting with Jeremy Cooper, that 2010 was going to be the ‘year of the gear’ with SMSFs.  He tended to agree… Limited Recourse Borrowing inside a SMSF has certainly started to take hold, predominantly from two key factors,

  1. the reduction in the concessional contribution caps; and
  2. our country’s love affair with property.

The date, 7 July 2010 is now an important one as we saw the introduction of section 67A & B into the SIS Act, with s.67(4A) being repealed.  These changes have certainly had an impact on how these arrangement are now structured, with only a single acquirable asset being able to be held on trust.  The issue of personal guarantees was resolved with them now being allowed, and on a positive note, the ability to refinance will certainly make the lending market far more competitive.

I actually think 2011 will continue to be ‘gearing heaven’ for SMSFs and limited recourse borrowing arrangements.

In addition to the SIS Act changes to limited recourse borrowing, the government also announced reforms to make these arrangements a financial product and allow only those advisers with a derivatives license to be able to recommend such arrangements.  There were many submissions made to Treasury about concerns with the draft regulations, from professional bodies, banks and other financial services institutions and businesses.  When an election was called, this fell off the radar, but I suspect will resurface again into the new year.

The ATO continued to deliver more rulings and interpretive decisions in the area of SMSFs, including the issuing of:

  • TR2010/1 – super contributions,
  • SMSFR2010/2 – addressing the issues about remaining a SMSF through the appointment of an Enduring Power of Attorney; and
  • many ATOIDs covering limited recourse borrowing arrangements

Excess contributions tax continues to be the ‘white elephant in the room’ for government.  With the halving of the contribution caps last financial year, there is expected to be more than 100,000 excess contribution tax assessment notices issued by the ATO. for FY2010.  Lobbying on this issue to date appears to have fallen on deaf ears…

Personally, 2010 also presented a change in direction for me as I now focus on the delivery of The SMSF Academy to provide education and training to both trustees and advisors.  We are achieving small but significant milestones with its development, with the website to be up and running in mid-February 2011.  We intend to have our first monthly SMSF eCPD update in February 2011 as well.  Click here to register your interest to keep up to date with future developments.

A reminder that if you haven’t completed either or trustee or advisor surveys, then we encourage you to do so by 4pm this Friday.  The winner will  be announced next Monday.

2011 looks to be as exciting and challenging as 2010… I look forward to continuing to deliver my views and strategies regarding issues affecting SMSFs.

(C) The SMSF Academy 2012
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