Accountants moving into the world of financial advice under the licensing regime should exercise great caution when it came to preparing statements of advice (SOA) as it was an area they must get right, according to a sector expert.
“Where I think it’s going to be a bit of a shock for most accountants, and this is what I’ve heard from my discussions, is that where you recommend a super interest, such as being able to contribute to a super fund, setting up a transition-to-retirement income stream (TRIS), setting up an account-based pension or doing a binding death benefit nomination, that has to be accompanied by an SOA,” NowInfinity principal Grant Abbott said during a recent webinar.
“The prerequisite of an SOA doesn’t provide any leniency – there’s a lot of requirements there and they can be quite complex.
“Certainly providing an SOA around a product for an SMSF is not as complex as, for example, doing financial modelling where we’re providing a TRIS with a set of investments for a client.”
SOAs must explain in clear and simple terms the costs, benefits and significant consequences of the recommended advice, should it be acted upon, Abbott said.
He added accountants would need some form of system in place in order to be able to deliver SOAs efficiently.
“Failure to do so may result in quite hefty penalties and investors have access to the Financial Ombudsman for complaints in relation to an adviser,” he said.
“SMSFs are not a financial product, but it is a group of financial products and that must be borne in mind when we go through the licensing [process] and, more importantly, the requirements to meet the Corporations Act.
“Accountants are about to move into this world in the next two months, so apart from the budget and everything else that’s going on, we’re now at the forefront of [licensed accountants] providing recommended financial products for SMSFs.”
In terms of the competency standards around SMSFs, one of the key requirements was the ability to read, understand and apply the law, he pointed out.
“Now I’m not actually sure if that’s being tested out in the marketplace, but essentially those requirements fall under ASIC Regulatory Guide 146 (RG 146), but just getting RG 146 is by no means anywhere near getting a licence,” he said.
“To have the ability to provide advice on SMSFs, RG 146 is your bare rudimentary or your basic platform in which you can then move on to provide advice.”
