One on one with…Vicki Stylianou

Vicki Stylianou

How did you come by your introduction to the SMSF sector?

When I came back to Australia in 2002, after working overseas, I found my self immersed in the superannuation industry. My involvement with SMSFs was an evolutionary step from there as the sector really took off. I was drawn to the sector because it was such an interesting animal from a lot of different perspectives. I suppose I’m like a lot of the population where I like the idea of control, so I was attracted on a personal level, but then I thought about the strategies involved and the flexibility that allows you to be creative as well and I like that. From a professional point of view, SMSFs are a big deal and seen as the place to be and a lot of our members are SMSF practitioners, making them a big deal for me.

What specific role do you play at the IPA in regard to SMSFs?

I have responsibility for all financial services and that includes superannuation and SMSFs. I also look after policy and within policy we have our different areas such as tax, competition policy and corporations law. So I have responsibility for policy and policy development and advocacy, and that applies across our spectrum of different subject areas. One of those is superannuation and SMSFs fall within this area.

Does the SMSF sector dominate your superannuation responsibility?

It’s a big part of it, but I wouldn’t say it dominates. There are different levels of involvement though. If we’re talking about practitioners and what’s important for members, then SMSFs make up a big part of my responsibility. But I also have involvement on a bigger level and that’s from the perspective of the profession and public interest. Here we are heavily involved in retirement incomes policy, and within this SMSFs are one part of it and they don’t apply to the broader Australian population. So from that perspective SMSFs don’t actually dominate, but they still play a major part.

What shape do you think the sector is in?

It seems to be in pretty good shape. Going back to the Cooper review, it was given a big green tick and from what I’ve seen things haven’t changed that much from that environment. It’s becoming more and more popular, particularly with younger people. AMP just released some data indicating nearly 41 per cent of all new SMSFs are established by people under the age of 45. I think this younger group will emphasise the control piece, but from where we sit the sector is still pretty healthy.

How well informed are accountants about the new licensing rules?

After four years of talking about it, awareness has grown that licensing will happen. I think there is still a huge portion, our research shows over 50 per cent of our members, who don’t quite know what they’re going to do. The next half of the transition period will be very much about not just raising awareness, but helping them make decisions around what they’re going to do in response to FOFA (Future of Financial Advice). Most commentators have distilled it down to four main options and the message to the accountants is you’ve got to make a decision, here’s the decision tree and we’ll help you through it. I think as the transition period comes to an end there will be a greater sense of urgency and the big rush at the end. Still, one-third of them are saying we’ll do something closer to the end of the transition period and it will come around pretty quickly.

Is there a chance we’ll see greater urgency sooner now more conversations about the subject are taking place?

It would be great if that happened and all of a sudden a bunch of accountants said we’re not going to wait until the last minute. There might be a tipping point where a heap of them decide to act and that would be so good because I’m a bit fearful of what might happen come May/June 2016. The rate of action could accelerate and hopefully that’ll happen sooner rather than later. At the IPA we’re doing a lot of marketing activity and communications around this topic, but I think we’re starting to get to the saturation point where our members are starting to show a bit of FOFA fatigue, so there may actually be a bit of a lull in the immediate term, but I think they’ll come out of that and go full steam ahead from there. They could be coming out of the lull post June this year and we could see people taking the time to do something.

Have you had any indication from your members about the licensing option they’ll favour?

The trend emerging seems to be choosing to become an authorised representative of an existing licensee in what we call the middle level of licensing. This is what we call the strategic level, where the accountant can get more into providing actual advice and that’s logical because the people who are going to move earlier are more likely to be those people who want to venture further into financial services and make it a bigger part of their practices. Typically these individuals don’t want to get a full AFSL (Australian financial services licence), they don’t want to sell products, but they need to do a bit more than the entry-level activity.

Will the new licensing rules result in better outcomes for SMSF trustees?

Definitely. The quality of advice will improve and that’s the whole point of FOFA anyway. There’s a lot more emphasis on education and a greater emphasis on the quality of advice from all quarters of the industry. So you would certainly hope trustees are going to get better quality advice and perhaps more accessibility with some downward pressure on pricing. Scaled advice should make a difference too because it should result in more people getting exactly what they’re paying for, so I think it’ll become a more efficient system.

Do you think financial planners will feel threatened by licensed accountants providing advice?

I think there are probably a lot of anxious people, especially planners, in the industry right now. I don’t think we’re going to see a flood of accountants start to provide advice to trustees and to consumers generally about SMSFs. Firms already in that space might start to move up the value chain, but I think the same might apply to financial planners. They’re going through the same process from what I can see in terms of providing a better service offering to clients, including pricing and more accountability. It’s a competitive surge, but at the same time it might well create a more efficient model for them anyway.

Apart from licensing, how well are accountants adjusting to other disruptive developments in the sector, such as the commoditisation of administrative services?

Some members are burying their heads in the sand and are in denial about some of the changes and the effect of technology. We get a lot of members saying they’re so busy, have so many clients, and have so much work that these elements don’t seem to be impacting on their businesses. So they’re not thinking more than five years ahead. But then there is a large group in the middle who are responding by changing their business models and starting to provide more advisory work not necessarily in financial services. There is also a greater move towards specialisation and a lot of our members are certainly getting the message that being a generalist is only going to be good for the next few years. However, it has emerged that getting good qualified staff is at the moment their biggest impediment. Offshoring might be a solution, but more than half of the members I talk to are quite resistant to it.

What’s the biggest change in the sector you’ve seen?

It’s the way the sector is now recognised as fully fledged and no longer just the domain of rich people and high net worth people. SMSFs now are more readily accessible and that’s been a big change. I think the increased coverage of the sector in the media is indicative of this.

If you could change one thing about the sector, what would it be?

I’d say the compliance requirements around the limited licence are too onerous. If the government seriously wants people to obtain a limited licence, the compliance makes it ridiculous. The compliance burden is completely out of whack with the practitioners’ capabilities under the Corporations Act and I don’t think it’s going to be as beneficial to consumers as the government had hoped. If I could change something on a broader scale, it would be to make consumers more financially literate.

What’s the biggest challenge for the sector in the coming year?

From our perspective it would be coming to grips with FOFA. Twelve months from now we’ll be getting dangerously close to the end of the transition period and over this time hopefully more accountants will have taken steps as to how they will manage their FOFA obligations, be it licensing, referrals or not providing SMSF advice. So I would hope within 12 months we’ll be in a better place and people will have moved faster to deal with these changes.

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