Advisers 'dodged bullet' for too long: IPA

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Public accountants are pleased financial advisers will finally have to comply with a stringent regime which includes possible penalties up to $27,000 when providing tax advice from July.

The controversial Tax Agent Services Act (TASA) comes into play for advisers who provide tax advice on 1 July, after a year’s postponement.

“Advisers now have to be competent at providing tax advice. Now there’s an obligation on them that when they provide tax advice, they are accountable,” Institute of Public Accountants senior tax adviser Tony Greco told Wealth Professional.

“Advisers have always been reluctant to accept that when they provide financial advice the tax stuff is not just ‘incidental’ or someone else’s problem. They’ve dodged this bullet for a long time. There’s now a recognition that they do provide tax advice and they have to be competent to provide that advice because the client is relying on them.”

What is the most important part of the act advisers need to watch out for?

“If their client is a small business and they’re selling that business they can get into some pretty heavy tax issues. If they’re managing an investment, simply buying and selling, it’s different. So it depends on the needs of the client,” said Greco.

“But as soon as advisers get into an area they are not familiar with, the obligation under TASA is that they don’t provide advice. So act within your competence and don’t provide advice which you don’t understand.”

Although the act’s provisions are not yet set in stone for advisers, there will be ongoing education requirements governed by the Tax Practitioners Board, which oversees TASA. Advisers will also have to stick to a code of conduct.

Extra regulation naturally comes with extra penalties – but just how stringent they are might come as a shock down the track.

The penalties for advisers are still being tweaked, but judging from the “pretty stiff” penalties for tax agents operating outside the registration system, they will not be light, said Greco.

A tax agent practicing without being registered with the Tax Practitioners Board can be fined $27,000. “But if you’re not competent then there will be a lesser penalty than that, you will probably just have to go off and do more training,” said Greco.

He sees TASA as protection for consumers seeking advice.

“It’s been a long journey but it’s come to a point in time where it’s acknowledged that advisers do provide tax advice and they recognise those responsibilities. The Tax Practitioners Board will oversee that regardless who the public gets tax advice, there is minimum competence and standards out there.”

The Financial Planning Association launched a comprehensive education campaign yesterday to prepare planners for the implementation of TASA.
 
The campaign includes a series of four webinars, national roadshows around the country for FPA members in April to June, and a TASA online ‘toolkit’ containing easy reference guides, FAQ sheets and an article library.

“Our priority is to support the financial planning profession, which in turn has the best interest of Australian investors at heart,” FPA CEO Mark Rantall said.

“We are constantly in discussions with the FPA community about the issues that are top of mind for planners and practice owners. One concern that consistently comes up is the challenge of adapting to new legislation and regulations.

"So, we have made it a priority to provide a variety of resources designed to equip planners to continue providing best-practice advice up to the highest professional standards.”

MORE:
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Work cut out for advisers to add value
  • Peter Alderson on 21/02/2014 9:41:40 AM

    Excellent, what are the penalties for all those accountants who provide unlicensed financial advice. An accountant recently told one of my clients not to take out Income Protection?

  • Concerned on 21/02/2014 9:55:54 AM

    Accountants can't give financial advice - Financial planners can't give tax advice - sounds fair

  • Jim on 21/02/2014 9:59:58 AM

    Whilst I agree with the comments made most ethical planners have always referred tax advice to reputable accountants. Be careful what you wish for as it has been common for a long time for a lot of accountants to overstep the mark also and give financial advice. It is not beyond the realms for planners to think if they have to be licenced that they may consider to be fully trained in tax and able to give advice in tax.

  • Innocent Observer on 21/02/2014 10:10:02 AM

    With all due respect, Tony, I don't think you understand what it is that financial advisers "do", or how we work with accountants within the existing framework.

    If anything we create more business for accountants by identifying aspects of our clients' situations that require specific, professional tax advice. In order to do this we (those of us that have apparently been dodging bullets) need to know enough about enough of the tax system, rules and regulations to be able to identify these issues. I work with (not against or in competition with) my clients' accountants, and I can tell you that in many cases we pick up on issues that their accountant completely missed. This isn't to say their accountant isn't any good, just that a tax agent used to dealing with client X's tax return is probably not going to get into enough detail about the client's situation or family circumstances to know where and when advice needs to be provided.

    Trying to prevent financial advisers from providing any kind of tax advice is will substantially dilute the value that is to delivered to the client (of course, behind closed doors we will still consider the tax implications, we just won't tell the client).

    I'm not trying to shoot the messenger here, just that I feel that the media and policy approach (which seems to be inspired through self-interest, not consumer protection) is going to do more harm to accountants than good, and is going to drive a wedge between financial advisers and accountants.

  • alleycat on 21/02/2014 10:40:42 AM

    @ Peter Anderson.
    A good question Peter.
    I once had an Accountant several years ago tell a client that it was OK for him to give personal guarantees for debts incurred by his business to an organisation. I advised him that his personal assets (viz; your family home) backed the personal guarantee. His wife was horrified at my news.
    I said get your Accountant to put it writing that your home is not at risk.
    He's still waiting !

    Some unlicensed accountants will continue to provide financial planning advice because.... they think they are experts at everything.
    Even with a reasonable University education, I wish I knew as much as they think they know.

  • Observer on 21/02/2014 11:12:27 AM

    Tony, you obviously have some fairly strong views, in a negative way, about the financial planning industry.

    I think the issue of financial planners giving inadequate advice in regards to tax is concerning, however it goes both ways, accountants are just as prevalent at giving inadequate financial advice to clients.

    There are some very well run and progressive financial planning practices that you are tarring with your views, and its that attitude that continues to flame a tenuous relationship between our industries.

    It has been said many times before, that if everyone put their egos aside and considered the best interests of their clients there is a role for accountants and financial planners to deliver world class advice together, which some are already doing very successfully.

    Rant over.

  • Les on 21/02/2014 11:33:11 AM

    Seriously how out of touch are the regulators when to give one piece of advice we need to produce twenty pages of disclaimers and warning yet an accountant can just verbally advice clients to buy Property in smsf without any abaya laid of the pros and cons and if its in the client best interest? I have three cleaners that have been advised by accountants to by real estate with super funds of less than $100 k balance with no written advice. why is this situation allowed to continue , if advisers need to be qualified for tax advice why shouldn't accountants have to produce an SOA the same as advisers ???

  • Markh on 21/02/2014 2:18:02 PM

    Les

    It seems that you may have been overseas and out of contact over the past 6 months! The law has changed. Corps Regs. will remove the 'accountants' exemption' regarding SMSFs from 1 July 2016. In the meantime (the transition period) a new Limited AFSL has been introduced for accountants since 30 June 2013. By 1 July 2016 all accountants will need an 'actual' AFSL, a 'limited' AFSL or be a representative of either to give SMSF advice. At that point they will need to do most of what you are doing - FSGs, SOAs, replacement product disclosures, best interests tests, membership of FOS, mandatory PI etc...

    Hope this puts you more at ease!

    Regards

  • Bob on 21/02/2014 4:59:38 PM

    Firstly, I reckon if you stuff up and have to pay a fine and that applies to anyone (accountants and financial planners) then that ought to be enough.

    Secondly, we should kill all the lawyers, politicians and union fund managers who have stuck their noses into our business ;-)

  • Peter on 22/02/2014 3:05:03 PM

    good article. from these and most other comments of this sort, all I see is a lot of planners worried about accountants cutting into their space. its time to get over it, and work together or become a complete qualified professional.
    many reforms are long overdue, and being transparent (wether it be through what/how you charge or what you do) can only ultimately benefit all clients.
    we are still working hard to heal the scars caused by former professionals who charged clients massive commissions for doing nothing but sell them insurance or rollover funds, and never to hear from them again!

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