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Accounting, Auditing, Financial Planning

SMSF advice compliance “out of control”

SMSF advice compliance

The recent compliance changes in the SMSF advice space have been overwhelming for advisers and accountants, a compliance expert says.

The continuous change to SMSF advice compliance has reached an almost unmanageable level for advisers, a compliance expert has said.

Citing the outcomes of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the more recent Financial Adviser Standards and Ethics Authority (FASEA) Code of Ethics, Alexis Compliance and Risk Solutions principal Christina Kalantzis said the compliance changes SMSF advisers have had to contend with recently have been overwhelming.

“Especially in the last couple of years, I think there is so much compliance overhaul that it is actually getting out of control,” Kalantzis said at the SMSF Association 2020 National Conference on the Gold Coast today.

“When we had the royal commission, [in my view] it just [went] next level.”

The greater complexity had affected not just financial planners, but accountants, auditors and mortgage industry professionals as well, she noted.

She pointed out compliant SMSF advice in the current climate consisted of satisfying the best interest duty, asking for fair and reasonable fees, ascertaining whether the client understood the advice being given and ensuring clients were getting value from the advice.

Highlighting the best interest duty, she referred to the Australian Securities and Investments Commission’s Report 575, which stated 86 per cent of the 214 client files reviewed showed the advice provider had prioritised their own interests, or those of a related party of the advice provider, over the client’s interests.

“I think everyone has a conflict. It [comes down to] what that degree of conflict is and how do we manage that,” she said.

“I think training and education for all your providers is essential. I think documenting procedures on how you choose clients, how you get them from the accounting side and put them into financial planning needs to be documented, and everyone needs to know what’s going on.”

In November last year, ASIC announced it would not enforce the mandatory, industry-wide FASEA Code of Ethics that would apply to all financial advisers from January 2020.

Early last year, the SMSF Association predicted three possible financial advice outcomes resulting from the royal commission, each with differing degrees of severity.

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