Financial Planning

Limited licence advice system has caused confusion

limited licence advice

The limited licence system for those who provide SMSF advice has created confusion and a better system needs to be implemented.

A large chartered accounting firm partner has suggested confusion is the result of the current limited licence rules governing SMSF advice and a better system needs to be implemented.

Speaking during a panel session at Class Connect 2019 in Sydney today, Findex senior partner Kathy Evans told delegates as a limited licence holder she remains unclear about what advice she is able to deliver and what associated documentation is necessary. However, Evans pointed out the confusion caused by the licensing rules does not end there.

“Then I put my client hat on and say: ‘Well if I’m confused, what are they thinking?’ [Most likely:] ‘Who do I go to for this advice? Do I have to see a fully-fledged financial adviser? What happens if I just want particular SMSF advice?’” she said.

“What is advice? What isn’t advice? I just think there is a lack of clarity in it.”

She cited recent calls to potentially reintroduce the accountants’ exemption as evidence there is confusion about the licensing regime within the industry. In recent months, Treasury flagged the potential for a return to the accountants’ exemption.

Evans suggested the licensing regime must be better aligned with what clients want and must address issues such as whether consumers want a full statement of advice for guidance they are seeking on a very small matter.

Fellow panellist SMSF Association chief executive John Maroney said the feedback he had received was industry stakeholders recognised the current system is not working properly and acknowledged a change from Canberra is needed.

“It will need some government sponsorship to say ‘look, this isn’t working’. For 20 years we’ve tried to actually force everyone into a one-size-fits-all, full-blown financial advice [model] that comes with a price tag of $2000 or $3000 or more for what should be fairly simple questions for a professional person like an accountant to deal with,” Maroney said.

He added a reintroduction of the accountants’ exemption was an unrealistic course of action because it was not a fully workable solution in the first place, but he revealed the process to improve the system is already underway.

“Some people talk about having strategic financial advice rather than financial product advice. I think there ae a number of issues there and we’re talking to all the accounting bodies, we’re talking to the Financial Planning Association, we’re talking to ministers, so we’re hoping to get some movement on this over the next few weeks in terms of something we’ll start,” he said.

He said the process was likely to take some time as the government regards the implementation of the financial services royal commission recommendations as a matter of priority.

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