Providing SMSF advice can be complex, with several different professions offering services in the sector. Darin Tyson-Chan hosted a roundtable discussion to determine the most appropriate adviser to use in certain circumstances and some of the issues still complicating the picture.
Darin Tyson-Chan, Publisher, Benchmark Media (DTC): Welcome to the roundtable. As a starting point, have you identified any specific areas of overlap or confusion SMSF trustees might encounter when seeking financial advice?
Grant Abbott, SMSF Strategies principal (GA): I think it’s getting very confusing at the moment. For a lot of years after the introduction of the Financial Services Reform Act in 2004, where accountants were told they weren’t allowed to advise on self-managed super funds, only recommend them, and financial planners took over and said, ‘well, they’re licensed to provide advice’. But now we’ve got accountants having to get licensed to give advice and then you’ve got financial planners now having to get a tax agent’s licence in order to give tax advice. So, essentially it means the bar is getting quite high in terms of what they’re both required to do. But I’m not necessarily sure that in the superannuation area both sides will be at the same point. There’s a lot of regulation and there’s going to be a lot of fallout there. Also, there’s a lot of accountants and planners and, to a lesser extent, mortgage brokers and particularly real estate agents giving advice without necessarily being impacted by ASIC (Australian Investments and Securities Commission). I think it needs to get clued up, start again, start to clamp down on these people.
Peter Bobbin, Oliver Rockwell managing principal (PB): The superannuation industry is enormous. It’s just enormous. Self-managed super, as we all know, is the largest sector in the whole superannuation economy. What people have to understand is they need to make an effort to get good solid advice. I absolutely agree with what was just said about the increasing regulation, but with increasing regulation comes increasing scrutiny and, from my perspective, I’m observing that a lot of people are now looking to stretch the super envelope in terms of tax. What people need to understand is that it’s easy to stretch the super envelope and it’s even easier to break it. When you break it, you break it in a very bad, big way. And if you have a look at the Australian Taxation Office (ATO) commentary on how they are looking to target their audit for the coming years, the focus is very much on the SMSF market. So the importance of getting it right cannot be understated.
GA: I agree. I think a lot of it’s the lawyer’s problem … particularly around estate planning. You’re probably one of the few estate planning lawyers that actually understands SMSFs, whereas the majority of lawyers tend to pass everything over to the estate, which has its own problems. I’m not sure lawyers are qualified necessarily to talk about superannuation in an estate planning context. I mean there’s probably another loop that we’re missing out on in terms of the advisers and you must see it too; you’re seeing some of the advice from other lawyers and [you must] just shake your head.
PB: I absolutely do. There are many lawyers that aren’t qualified and yet they do advise on superannuation. But when it comes down to it, a very great many of the issues in superannuation are legal.
Simon Makeham, Makeham Financial Services principal (SM): I’d only say one thing though, Peter. One of the steps we always take is we review their estate planning. That’s not to advise them on what they necessarily should be doing, but, more often than not, I still see directions in respect of their SMSF assets being made in their will. So that raises a red flag as to whether or not the lawyer understands what they’re dealing with regarding SMSFs.
PB: And the answer would be no.
GA: I remember at law school 10 lectures on tax. But absolutely not one lecture on super, and you think how is it possible that lawyers are going out giving SMSF advice and I wouldn’t just say lawyers, I would say accountants and planners, without strategic training?
PB: On a positive note, the tax office website is quite reasonable as a source of reference. And looking at the ASIC website, called My Money, it is quite good. For those who don’t have any starting point at all, they are both good to look through, read and digest. They’re boring, they’re basic, really don’t add a lot, but it is independent. It’s that base which I think can be rather useful.
Scott Girdlestone, William Buck senior adviser (SG): Look, I think in all of our experience, most clients, even though you asked them to read things quite a lot, they don’t. But what really is more of a concern for me is that an SMSF really isn’t self-managed in most instances. Trustees need help. They need advice. So what’s the minimum level of education that an adviser should have to be able to advise in this space and that really hasn’t been addressed properly yet.
DTC: If we go right back to basics and the establishment of an SMSF, who’s the best person to seek out for advice?
Andrew Yee, HLB Mann Judd wealth management director (AY): If you look at all the statistics and the data, historically accountants have been the people … giving and providing advice on setting up SMSFs. Now, with the licensing requirement for them to be qualified to give this kind of advice, accountants will have to upskill themselves to stay in this sector. If not, they may move out of the sector or refer the work to qualified advisers, financial planners and so forth. You’ll find most clients would see their accountant about setting up their SMSF and they’re very reluctant to go to financial planners.
SM: Isn’t there a reluctance among the accounting community to actually outsource any part of their client work, including advising specialist areas like SMSFs?
GA: I couldn’t imagine them doing that.
SM: That’s been my experience in dealing with other accountants. So, on the whole, they’re very reluctant to allow their client to go outside and, in doing so, what they’re actually doing is delivering inferior advice to their client or not delivering any advice at all. That’s the problem.
AY: It is a problem and there is a reluctance to refer their clients to other practitioners, but I think they’ll have no choice now. They have to either do that or become qualified to supply the advice.
SM: Policing of the new rules could give problems as well. Previously we’ve had a law which limited the amount of advice or the type of advice an accountant could deliver, and yet I’ve seen many cases where that’s been overstepped. However, there’s been no policing of this law whatsoever. So I don’t believe that we’ve got a solution for policing that problem.
GA: It’s been estimated the new licensing rules will add another 10,000 advisers to the SMSF sector. ASIC can’t even handle the licences right now. Imagine having 10,000 entrants. How is it going to regulate that many more?
SM: It really shouldn’t be decided [by] a law or through a regulation as to where somebody seeks their advice and who should be delivering that advice. Most of these people, we assume have no knowledge, but a lot of them do have knowledge and a lot of them are looking to build on that knowledge and they have the ability. Most of them are successful people and they have the ability to choose who delivers their advice, whether it be their lawyer, their accountant, their financial planner or a combined effort, something I support, considering three heads are better than one. To me, that’s something that’s severely missed at the moment, the ability for the SMSF member to actually seek advice from the person who they like.
DTC: What about the formulation of the investment strategy? How well is an accountant equipped to provide advice on this item and is a financial planner the more appropriate person to see for this?
SG: I’d like to get away from labels of lawyers, financial advisers, accountants because in my view it doesn’t really matter. If they have the experience and the expertise to advise on it, then it doesn’t really matter. What really matters is actually making sure the clients’ needs are actually being focused on and that includes the investment strategy. It’s not just forcing product down their throats. That’s the most important thing.
PB: Super is much more than just tax, which is the way a lot of accountants view it. Super controls a person’s life in the future. It’s not about money, it’s about how much they’re going to have and it’s also about the financial security today. So an accountant talking about establishing an SMSF implies the client is going to withdraw money out of a multi-member fund. In doing so they may completely give up any life insurance they have and, frustratingly, those accountants who don’t have the broader experience in superannuation won’t recognise that fact. Then all of a sudden you’ve got a client who had life insurance, who now doesn’t, and just may not be able to get it again. So the regulations, as frustrated as everybody may be about them, is forcing people who have different spectres and spheres to more fully embrace superannuation.
GA: We’re talking about who’s actually advising them, but at the end of the day, it’s the client who’s got the protection under all the laws. Now we have to act in the best interest of the client and, as you said, there’s a lot of stuff going on other than the SMSF. It’s not a static thing, it’s not like selling a particular bank account. So if you don’t get it right in terms of the best interest, you’ll have lawyers down on you pretty quickly and the professional indemnity providers will just run for cover because you haven’t performed in the client’s best interest. So, it’s about putting the client first.
SM: I was going to say best interest is an interesting way when it comes to commencing an SMSF. You hear a lot of people go out there and say that you need a minimum amount of money to commence an SMSF. But I don’t think that that’s right because it shouldn’t be about the money that determines whether or not your adviser would recommend setting up an SMSF. It should be the actual need and the suitability of that structure for that person and I just think if we start to try and legislate or put guidance around when somebody should be in an SMSF or when they should be advised, we run the risk of catching or giving inappropriate advice, when in fact it might be appropriate for somebody to start an SMSF with $100,000.
GA: So if someone has $100,000 of assets and borrows $300,000 to buy a property, their asset base has suddenly gone from $100,000 to $400,000. So now, with a lower balance you can actually jump over that hurdle.
PB: The number is not prescriptive; it’s just a guide. So, I agree with you. SMSFs, as the name implies, is all about being self-managed; it’s not about the dollar amount. Having said that, you really should think about it twice, three and four times because if you’ve only got $200,000 in assets, you need to consider what it will cost and your time commitment. If you’re going to build that very quickly, okay, but there are certainly some people that should never get into SMSFs.
SG: I think they’re all very fair points. So, I just want to go back to what Grant was saying, which is the most important thing – an SMSF is just a tool in the wider strategy. If the client’s real needs are not understood, then they may well go into an SMSF without actually realising the need for it. You know, it could be like you said, people coming in saying “my next door neighbour’s got one, so I want one too.
SM: So you’re saying it’s not a question of who should be giving you advice, it’s a question that whether or not that person giving advice has got the skills and the experience it doesn’t matter what their profession [is].
PB: In many ways, I absolutely am saying that, because an accountant who has developed a great deal of superannuation depth will understand that it is appropriate to get confident financial planning advice, it is appropriate to have everything properly documented, properly listed, it is appropriate to actually do some estate planning around this thing, because if you don’t, it’s a litigation war.
DTC: What if a trustee wants some specific strategic advice. Who should they turn to?
GA: Probably, sometimes, the most dangerous SMSF is the DIY fund where mum and dad have done it themselves. I have seen a number of cases fall over when they’ve tried to set up a limited recourse borrowing arrangement and buying a property in an SMSF that hasn’t even been set up yet. They’re just thinking “well, we can do all this”. The first thing is they really need to get advice. But then there are different levels of advice. There are a lot of people, particularly the baby boomers or war generation, who tend to go to their accountants or their planners and they simply get given everything to read on SMSFs, but most of them will say “well, no, you’re my adviser, you tell me”, which I think also puts a problem back on these guys because the Corporations Act says the adviser is supposed to give enough information for the client to make an informed decision. How can they make that informed decision when they’re actually flicking it back to the adviser? So that’s a difficult one. For gen X, I think that’s a bit different because by the time they enter your office, they’ve researched everything on the Internet. They’re experts and they’re really just testing you out along the way, whether they know the right answer or not.
AY: Now they don’t even have to see their accountant. There is so much out there being advertised, they just can go online and do it themselves. Get an SMSF set up for free and then only pay $600 a year to run it. So how good is that? They don’t need to see an accountant, they don’t need to see a financial planner – it’s so easy to do it yourself online.
GA: But that’s the fund without advice. That’s what I said is dangerous; it’s a DIY fund.
DTC: So you’ve been challenged on price point?
AY: Yes. The client will say to you: “I can go set up and run my SMSF through XYZ for $600 a year. Why should I go through you? Can you demonstrate what you offer in comparison?
SG: But, I think, in the marketplace, there’s always going to be people that are just going to go for the cheapest models of anything. Any adviser, no matter what the background of discipline is, that’s worth their salt should be spending time to educate their client. That’s the most important thing because if they are going to get comfortable and really understand their strategy, that has to be the focus and at the end of the day, that’s what you’re trying to look out for.
SM: Scott, I agree with that, but we have to be careful that we don’t believe that we’ve educated our client in a one-hour meeting what’s taken us 10 years to learn. We have to keep revisiting the same things over and over and over again.
SG: You’re right. It’s too simplistic to sit there and just say: “We’ve had a one-hour meeting, okay, you now understand SMSFs.” That’s not the case; it’s an ongoing education process and it certainly shouldn’t be done in just one meeting to then say let’s put into an SMSF.
SM: I still think people will come for advice regardless of all the information that you’re talking about, even with all of the information you’re talking about, Grant. They still need assistance in interpretation of that information and that’s why they come for advice and that’s what differentiates a good adviser, the one who’s got the knowledge, away from the ones who don’t. Because they will be better geared to ask you questions and if you can’t deal with their questions adequately, well they can go somewhere else. So I think that the industry itself, and whether across all sectors about the profession, will filter out those who aren’t giving the advice and people will come to the higher quality.
PB: Sure, but at what cost? What cost for those who go to the wrong [person] and obtain the wrong advice? I’m not talking about fee charges; I’m talking about massive losses of superannuation.
SM: I don’t think you can regulate to protect people against those types of situations arising, I mean, that’s just life. That happens.
SG: Do we not have certain ethical obligation to protect people from themselves?
SM: I know accountants, for example, who are delivering advice to people that is not anywhere near the level that it should be. But that accountant believes they are dealing with their client to the best of their abilities. The client’s happy – they walked out of there thinking “well, I’m happy”. That’s just life.
GA: I think that’s where you need to have a standard and practitioners need to meet that standard because it’s not just about regurgitating information. It’s easy to go and do a Mickey Mouse course and just regurgitate what’s been taught, but you’ve got to apply what you’ve learned to the individual set of facts and each SMSF client has a completely different set of facts. Has anyone ever seen two SMSFs that are alike? Never.
DTC:Do the client’s preferences in this sector make providing advice more difficult? We all know on the investment side they like direct equities and property and many advisers aren’t equipped to provide advice in these areas. Does this complicate things further?
PB: I’ve got to be sympathetic to advisers because even the so-called experts will have different opinions. Every SMSF, the majority of SMSFs, will sell as part of their package a product disclosure statement (PDS). I hold a very firm view that for an SMSF it’s rare that you formally need to issue a product disclosure statement. But this is even more interesting: what about when you go from an accumulation fund to a pension fund? And again, you’ve got the experts saying you have to issue a PDS. Let’s understand the context of that. So I’m the trustee of the SMSF, I’m the director of the trustee of the SMSF and maybe it’s a single-member fund moving from accumulation to pension phase. So I have to issue a statement to me about the fact that I’m going to shut and stop my accumulation fund and pay me a pension, and I have to warn me about the pension that I’m about to pay me and describe to me the pension nature of the pension that I’m about to pay to me before I commence the pension and make a decision about me making the pension to me.
SM: But it’s a financial product, is it not?
PB: The Corporations Regulations make it clear you do not need to issue a PDS in a circumstance where it is reasonably expected that the person in an SMSF situation has the ability to gain the information.
SM: Does it specify SMSF situation?
PB: Yes, it does. All I’m saying is it can be difficult for advisers because you get the so-called experts that themselves won’t have a consistent point of view. Or you get people endorsing asinine situations, and I dare suggest it’s an asinine situation, to say that I as a trustee have to issue a statement to me about me starting a pension for my superannuation fund. The proper reading of the Corporations Regulations says that it’s not necessary.
SG: I think, Darin, you raised a really interesting point there when you’re talking about specific investments and the obvious ones are managed funds, direct shares and property. Leaving property aside for a moment, quite often we find, and the GFC (global financial crisis) has taught us, that not everyone is a direct share person, even though they believe that they are. So, in some cases, it’s actually better that they’re in a managed fund. We need to spend a lot of time … actually understanding what the client is trying to achieve. So if you don’t need to shoot for 20 per cent, you don’t need to be aggressive.
AY: The clients who want to do it themselves don’t want to invest in a managed fund with another layer of fees added on top of the normal administration fees.
SG: Yeah and I think that’s generally where they start their thinking, there’s no doubt about that.
AY: That’s what they’re saying and that’s the reason why they have an SMSF.
AY: They have one as an alternative to paying retail fund fees with ongoing fees to fund managers and so forth.
SG: Yeah, look and I’m not pushing one barrow or another, our clients have all three, direct property, direct shares and managed funds. I guess what I’m saying is that we really need to understand the client and what’s actually best for them in the long run. I think to be a good adviser for them we sometimes need to help them understand the real risk involved in just picking 20 stocks. At the end of the day, as much as the industry likes to talk about it, no one has a crystal ball.
GA: As far as clarity for advisers goes there have always been divergent views on the tax side and in particular with clients. But the ATO is now starting to fill the hole extremely well and I’m not sure that ASIC is going to get to that stage around SMSFs because, I might be wrong, but it doesn’t seem to be high on their list. ASIC seems to be concentrating more on the upper echelon, you know, testing the credibility of the banks and big super funds. This is probably something we’ve actually got to put up with and, to be honest, I don’t know if that’s necessarily the right thing.
PB: Yeah, I think you’re right. It’s a skill set because the tax office by its very nature is “I’m dealing with the taxpayer”. So their skill set has been to give information for that person and this company and that trust, whereas ASIC has always been dealing at this multi-global level and indeed you can trace back the whole progression of financial services laws and it’s all been about diminishing responsible entities. So ASIC is not used to dealing with Mrs Smith or Mr Jones on an individual level.
GA: Now they have 10,000 licensees and can you imagine what that’s going to be like. It’s going to be a nightmare and then, behind them, there’s the hundred Mrs Smiths and Mr Joneses.
SM: Just on the PDS documentation, I wouldn’t support just not providing it so you rely completely on the trust deed. For example, if you commence a pension, it’s in my view wise to document the commencing of that pension through a series of minutes at least. Okay, now, I mean, largely I think that’s pretty much all we’re doing when we commence a pension for a client anyway. As for a product disclosure statement I think it’s quite useful to have so much explanatory memorandum there on each of the clauses of the deed so that the client can at least or the member of the SMSF can at least sit there and read it.
PB: I agree with that because that’s all about educating the person. Did you know that beyond product disclosure statements, you’ve got to identify how to contact the product issuer? I’ve got to put in the product disclosure statement how to ring me up. I wouldn’t put my own phone number in, of course, because if I try to ring me up, the phone will be engaged, you know.
SM: That’s an interesting point.
DTC: How many SMSF trustees actually read all of this paperwork?
PB: It’s to their peril that they don’t. It really is. I mean, you’re talking about where to get advice from and I think, Scott, the theme that you’re seeking to put forward, and all of you are, is that it’s about educating yourself. Let’s forget about SMSFs and just talk about super. For the vast majority of Australians, they will have, later in life, two fundamental investment resources: I live in one and the super is all the other. Super is not the investment, it’s the strategy, whether it’s multi-member, whether you’re a member of a retail or industry fund or if it’s an SMSF. If you work the super, it’ll work for you. If it’s in an SMSF, you need to do a bit more work and you really need to learn. And the more you learn, the better you can actually choose the professionals that will assist you.
GA: I think going back to what you just said, if you have your super, particularly gen X, where you’ve got couples that will be going for a long time and they’ll be in the system for a long time, so they will end up with quite a sizeable balance. But they do need to work their super. They can’t just leave it in cash.
SG: Yeah, I think you can talk about gen X and gen Y, which is a completely different pool of fish I don’t want to discuss right now, but I think it again comes back to what’s suitable asset allocation. Is it what the client actually needs or is it what the client can sleep with? And it’s somewhere probably in the middle. What the big issue for me is, regardless of age or experience, we just need to actually have for the advisers a uniform level of education. You’ve got to have that. And then from there we can actually appropriately, as an industry, educate our future clients. Because at the moment, I don’t see that we have a real minimum standard that’s enforceable. Is that fair to say?
GA: Yeah that’s fine. I think there are really good standards currently in existence, but there’s no one actually enforcing those standards.
DTC: Getting onto other more specific areas of advice and who the best source is: how about tax advice around SMSFs and will the new tax agent registration process affect this area significantly?
AY: I think the financial planner will provide tax advice in the future in the same way the accountant will provide financial advice under the new licensing regime. I don’t know if anything is going to change much.
PB: You don’t see financial planners with tax qualifications now easing out the accountants such that all that the client needs to do is go to a tax return preparer to lodge their SMSF? In particular with SMSF audit registration now, so that itself is yet another independent professional. So, you don’t see it having an impact? It’s interesting because you’ve got the accountants here and they have to be licensed to give financial advice and you’ve got the financial planners who will have to be licensed for accounting. Where is it all going to go?
GA:Or is it going to be homogenous? Are you going to end up with these guys in the middle who both have the same skills? I might be right or wrong, but I believe the accountant’s actually going to benefit. It’s going to be an easier stretch for them to get their licence than for a lot of the planners to register as a tax agent.
SG: I don’t think that there’s going to be a huge change and the reason is that if you’re going to be a financial adviser, you can’t be a tax specialist, you’re always going to need accountants that are tax specialists, just the same as you’re always going to need lawyers that specialise in their areas as well. What I do think it’s going to do though is bring up an education level in our industry, which I think is very important.
PB: But you’ve got associations such as SPAA (SMSF Professionals’ Association of Australia) and it is holding itself out as the only true professional association or organisation that’s committed to superannuation.
GA: Is that true?
PB: Well it is the only association that’s wholly concentrated on superannuation, really.
SM: Professional association or association for professionals.
PB: As opposed to associations of members.
PB: And, look, I think, that’s an interesting point that you raise, Simon, of course, because an association that’s for members, I would assume is all about education and processing, and developing the individuals.
SM: Not all about, but that’s one of them.
DTC: So with the new professional requirements for several different SMSF advisory sectors, is there a danger the overall quality of advice will actually diminish?
GA: There’s always experience to fall back on. I think everyone, if you have a law degree or planning degree or science degree and you’ve been going for like 15 years, you’d obviously know your field a lot better than someone who’s actually just come in. It’s a good point. Some of those qualifications or requirements are generally set at a low standard, the lowest bar to get it in, and that’s the problem. I’m not sure who sets the tax agents standard. If you’ve done some tax work in the last 10 years, that’s okay, but by how many pages has the tax legislation grown or super legislation grown in the last 10 years? It’s virtually doubled or tripled in size. That’s very dangerous.
PB: Let’s take a look at the lawyers. The only professional that’s actually not been regulated in this area are the lawyers.
GA: Why do you think that is?
PB: Well, let’s not talk about why is that, let’s actually cast a view on what that means. I’ll actually put it out there and say that because there’s no regulatory body that’s pressing lawyers who are working in superannuation, to actually be skilled at them, you have a massive variety of skill set and largely it’s poor. I would certainly say that. Whereas in the accounting, in the financial planning, goodness me, even in mortgage broking and life insurance, the continuous barrage of regulation is at least forcing an adoption of educational standards, which ultimately, I think, isn’t in the best interest of clients. I’ll put it out there, sadly, that quite a lot of my own legal brethren do not have the sufficient skill set to advise in superannuation, and yet, we face a lot of exemptions. So I think, as much as we complain about regulation, it has all been about achieving increasing standards and I think that has been achieved.
SM: Back to your point, Darin, I’m a tax agent, I have my own financial services licence, I run my own company practice, and accounting practice. I can fit into a lot of those boxes, but sometimes it’s difficult for me to actually decide which box I need to fit my advice into.
AY: When clients come to you, do they come to see the accountant or they come to see the financial planner?
SM: They actually come to see, what I would say, is a financial professional. Somebody who can give them advice in relation to a lot of the matters, but someone who doesn’t hold themselves out to be an absolute expert in every matter. I’m prepared to go to a lawyer, or to go to somebody else, if that’s what’s needed to get the best solution for the client.
SG: Simon, I think that’s a great point because the way in which we work with our client is certainly very much a board of advice where we would sit down and there will be a financial adviser, a tax specialist and also a lawyer, and that’s going to get you the best outcome.
DTC: Let’s look at estate planning. Are you Peter, the lawyer, still the best source for this type of advice?
PB: As with everything, it’s the right people with the right skill set, commonly working in a team environment, as Scott mentioned, with other professionals who can bring to play on a particular client issue their own skill set. Really that’s the long and short of it. The client needs to be talking to whichever professional they’re going to see a whole range of questions where they’re testing that professional on what their knowledge is. I have seen stunningly disastrous situations in estate planning where the superannuation has been entirely ignored or ill-considered or misunderstood and that’s the majority of occasions. Ignored, ill-considered or misunderstood.
AY: I think estate planning is probably one of the few areas that the accountant or planner would defer to the lawyer, rather than handle it themselves.
SG: The key here, I think, is really, as I said, regardless of whoever the first adviser the client goes to, is really spending the time to understand their family situation, what it is that they want to achieve and they’re getting the right people in the room to make that happen. If I was a trustee, that’s what I would want.
DTC: If we look at limited recourse borrowings then, and the complexity involved there, is this an area where an advice panel can really make a difference? And what about the influence of the mortgage broker and their perceived opportunism over professionalism?
SG: I think the danger is where advisers are trying to be all things to all people and they just can’t be. So, you know, I don’t want to sound like a broken record, but coming back to that board of advice, it’s so essential for every trustee to have that, so they’re getting the appropriate advice and sitting down in a roundtable like this and talking it through.
GA: Perhaps we should say we need SMSFs as an umbrella and to have a whole lot of specialisations within that. At the moment, the competency levels are really RG 146 and set at such a low level. Perhaps the borrowing component and the estate planning, by themselves, should have their own competency units where you need to meet certain criteria before you can provide advice on them. At the moment, anyone can say that they know everything about SMSF lending, but it is a fairly intricate issue and if you get one thing wrong it can be disastrous. So perhaps people need to have those direct competencies to lift the standard up and then if we all have that, it will be so much easier because the client will know what they are actually getting from that particular person.
DTC: Do you think the competency level you refer to might help avoid any damage people like mortgage brokers and real estate agents might cause to SMSFs?
GA: It probably wouldn’t be a bad idea for SPAA to actually say we’ve got our basic competency standards for a so-called specialist, but within that there are additional competencies that need to be addressed so that you’re seen as an expert in estate planning or expert in borrowing. That will create double hurdles the mortgage brokers will find hard to clear once the licensing rules come in.
PB: Just go and get a law degree, it’s much easier. (Laughs.)
DTC: Look, just a couple of last points: would you all agree that the admin services are still the domain of the accountant?SM:I feel that the term admin services is used very loosely because it comes down to the complexity of the advice and how it is structured. On numerous times I’ve come across funds that a lot of your standard admin people, and some accountants, would not know how to deal with the strategy and the fund. That in itself is a problem.
AY: You know, I still think the accountant is the main person carrying out admin on SMSFs currently.
GA: There’s so much cost pressure on that though.<
AY: There is cost pressure but most of the administration of SMSFs are still done by accountants. it’s really hard for the industry to have a dominant player, so whether that will change, I’m not sure. And with technology now you can perform the processes a lot more efficiently.
DTC: As a final point, and in reference to the SMSF sector being treated as a completely separate advice segment or umbrella to better service trustees, is radical change needed to achieve this?
SG: Well, look, I think we’re on the right path, the intentions are right. I think we do have a little bit further to go in terms of educating our industry to appropriately advise, but I certainly think we’re on the right track. I think that’s just one area where we could go a little bit further in terms of making the education process a little bit more robust and move on from there.
AY: I tend to agree with Scott. I think we’re on the right path. There’s increased regulations and increased qualifications for advisers, so, definitely our licensing is moving on the right path. We’ve now also got the SMSF auditors having to be registered by ASIC, so it’s going down the right path.
GA: I’d like to look back in three or four years’ time to see how far the accounting profession has gone. I think they’re going to swarm the whole of the industry and just take control. I think they’ll benefit more from the new licensing arrangements than financial advisers will benefit from the tax agent registration requirements. The good planners playing the part of the investment strategist will always still have that overlay to advise on what to invest in and how to do it. Then you’ll still have your experts to help with estate planning and all of those things as well.
SM: I think ultimately a client will identify, find an adviser who is right for them and I think that across all professions, we need to be very careful that we don’t fall into the trap that ignoring the skills that other professions can bring to the table in order to deliver the right solution for a client. So I don’t think there’s going to be a dominant provider of advice to SMSFs. I think across all practitioners a more professional approach is needed and an understanding of what they’re after is the best outcome for their client. If that means they need to call to another professional adviser to achieve that, then that’s what they need to do.
PB: And the one area I quite agree, particularly agree with how Scott expressed it, that the one professional I think is lagging all the others are the lawyers.