Allowing accountants to gain limited AFSLs will create thousands of “backyard administrators”, putting client funds at serious risk.
This is the assessment of Association of Independently Owned Financial Professionals (AIOFP) executive director Peter Johnston, who has expressed serious concerns regarding the impact that allowing up to 10,000 accountants to broaden the scope of financial advice that they are allowed to give will have on SMSF trustees.
Johnston is concerned that the proposed legislation would create thousands of “mini administrators" providing SMSF services to clients, making the regulators’ job nigh-on impossible.
“Considering the public do not have any protection against fraud in the non-APRA regulated space, how are the ATO and ASIC going to cope over 20,000 mini ‘backyard’ administrators, and over 500,000 individual funds out there in consumer land to regulate?” he told Wealth Professional.
“Let’s not forget that the Trio fraud occurred in an environment of less than 100 corporate administrators, how are the regulators going to cope with 20,000 of them?”
He also believes that SMSF promoters are “scaled and dumbed down” versions of product manufacturers and industry funds trying to convince consumers to buy into their own in house service
“It seems that the natural self-interest and conflicts of interest characteristics of humans are being overlooked with SMSF products," he said.
"Considering a significant number of SMSF structures are sold for the wrong reasons – low account balances or for fees with no investment advice – this latest development can only exacerbate the situation with consumers being at further risk.”
Where do you stand on Shorten’s accountant’s exemption replacement? Have your say by commenting below.
Shorten reveals accountant’s exemption replacement
Cameron on 29 Nov 2012 10:42 AM
Oh Mr Johnston, lets not push your own barrel. Lets not forget Cooper and the ATO have already reviewed SMSFs and given a good health bill with little issues - so you comments on low balances and wrong reasons seem to be out dated or of self interest - yet again.
Lets get real on 29 Nov 2012 10:48 AM
Agree with you about the licensing and the education levels Conservative. Can only be a good thing for consumers if they are getting good quality (educated) advice....from whichever source. Put everyone on the same playing field and let them compete, which this licencing will go someway to doing. Some of your other points are debatable namely: 1. Your deluded that a lot of the SMSF advice currently being given is not fee driven. Just plainly untrue. 2. Yes there has been some high profile planning situations that are deplorable, this is not disputed. However, be careful about placing all accountants on a pedestal because if there was an inquiry in to how many accountants have been breaking the law by providing personal financial advice (as defined) you would be shocked.
Conservative accountant on 29 Nov 2012 11:10 AM
Lets get real - you should not be offering medical advice as I assume it is outside that area of expertize and by the way I am not. This highlights my issue. My point here was to make people aware that it should not be fee driven and that clients should get the best possible advice. I am trying to educate the masses that this should be the case. I am not placing accountants on a pedestal but then they can't just sit back and take this barrage from a relatively new industry which is still trying to come to grips with the loss of commissions. I am sure financial planners give tax advice which they know very little about. It can be a very complex area. By the way what can a financial planner provide in that area as it stands and are they breaking any laws by giving tax advice outside their level of expertize. One for the viewers.
Lets get real on 29 Nov 2012 11:19 AM
Thank you for the free education (and on behalf of the masses?). Given your previous response I will assume you are adequately trained in this field also.
Conservative accountant on 29 Nov 2012 11:44 AM
I will rephrase just in case.... I have the appropriate experience to provide some suggestions as an accountant and ex financial planner at the moment until they work out how to educate us under the new arrangements.
david m on 29 Nov 2012 12:24 PM
We all know that RG146 can be done in a week. So there should be no excuses for Accountants not meeting this basic requirement if they wish to provide some advice. Now onto the matter of licencing..what is exactly achieved? The quality of the advice and the way it is communicated to the public must be the same as for planners. If there are to be exceptions - great! But this should apply to all.
John on 29 Nov 2012 05:24 PM
Why doesn't Wealth Professional interview someone who actually represents the professionals in this industry
Mark on 29 Nov 2012 06:04 PM
And so the Accountants vs Financial Planners war continues. Reminds me of the fable of the two nuns fighting over an orange. Who's the "Generalist" and who's the specialist? I'll leave that up to the general public to decided (I know how I convey to my clients the services I provide).
Peter Johnston - AIOFP on 30 Nov 2012 10:33 PM
Have a read of today's article in The Australian on page 24 titled 'SELF - MANAGED FUNDS DRAW ASIC WARNING', ASIC are saying the same things. 2007 Minister Nick Sherry spoke at our conference stating that 35% of all SMSF's were set up for the wrong reasons.No one disputes their technical superiority over retail but lets face it not all accountants are 'first class citizens'. You only had to look at the 35% of Great Southerns inflows were from Accountants being directly licensed to them to get the hint that they do like other forms on income income outside of the old tax returns! No it is not a war between Accountants and advisers, just every now and then you need to share in some of the market heat that inevitably gets blamed on the advisers regardless of the mitigating circumstances.