Accounting, Regulation

Substance of advice requires greater focus

The accounting profession must place greater importance on substance over form within the framework of the new licensing regime, an industry executive has said.

During the recent SMSF Association “Accountants and SMSFs – what lies ahead?” roundtable, Prosperity Financial Services principal director Nidal Danoun said while forms and documents are an important aspect of providing advice, the substance, or reason, behind it has been somewhat lost amid the licensing challenges.

“The one element I’ve [observed] is that accountants are struggling with substance over form because substance is important, but in financial services so is the form,” Danoun said.

“I hear from accountants who say they can’t say much now because they’re too worried because it’s hard to talk about any of this from an information-only basis without giving advice.

“What I’ve found is that for those who have chosen not to have a licence, they’re doing a disservice to the client or to themselves or to both because there are a lot of things to talk about now, such as the new work test exemption, contributions and pensions.”

He noted this was not the intended result of the new licensing regime.

“If we put the form aside, though the form is important, what’s our job? It’s to help clients, that’s fundamental,” he said.

“But people are talking more about the statement of advice (SOA), fee disclosure statements (FDS), et cetera, and I’ve been dealing with work close to the royal commission and remediating advice, and a lot of the advice in form was okay, but they’ve given a FDS but forgotten to provide the service.

“There’s been so much talk about the forms. Again, I’m not questioning it or suggesting it isn’t important, but at the core of it our role is to help the client.

“We’re failing that whether we don’t want to have a licence or just want to tick the box to please the regulator, and we’re failing that not in form, but in substance.”

He suggested it was time for the accounting profession take a more balanced approach to substance and form to ensure the key point is not missed, which is ensuring clients are receiving appropriate advice from their accountant.

“At the substance level, what is right for the client?” he said.

“Regulations came into place not to ensure we’re giving SOAs but to ensure people don’t receive bad advice.”

Verante Financial Planning director and SMSF Association board director Liam Shorte added: “You can have the perfect SOA that covers everything, but for that person’s circumstances it could be totally inappropriate.”

The roundtable concluded the association’s inaugural SMSF Week last week.

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