Accounting, Financial Planning

Accountants backing away from SMSF advice

SMSF advice accountants

The number of accountants offering advice to SMSF clients via financial planning arrangements has dropped markedly in the past year.

Accountants have moved away from providing financial advice services to SMSF clients and are now making less use of in-house and external financial planners, according to data collected by Investment Trends.

In its annual “SMSF Planner and Accountant Report”, the research firm found the number of SMSF accountants who stopped providing financial advice to clients with the funds increased from 22 per cent in 2020 to 36 per cent in 2021. In contrast, the number in 2019 was 26 per cent.

The shift away from providing financial advice impacted both in-house planners and external referral arrangements, with the level of external advice declining from 31 per cent to 26 per cent and the level of in-house advice falling from 46 per cent to 38 per cent, according to data provided to selfmanagedsuper.

This was a much larger decrease than between 2019 and 2020 when the use of in-house planners only fell from 48 per cent to 46 per cent.

SMSF accountants whose firms do not provide financial advice cited the compliance burden as the leading hurdle in providing financial advice to SMSF clients in both 2020 and 2021, with more than 40 per cent listing it as the chief reason.

Not meeting the requirements of their financial services licensee was a reason cited by just under 40 per cent of accountants surveyed for the report, an increase from around 35 per cent in 2020.

Failing to meet the requirements of the Financial Adviser Standards and Ethics Authority (FASEA) also rose from 25 per cent to 28 per cent over the past year.

InvestmentTrends told selfmanagedsuper these numbers reflect the ongoing changes in financial advice for accountants at a practitioner and practice level.

“At an individual level, the once-off exam deters many accountants from expanding their services to trustees, but at the firm level, accountants are more likely to cite challenges relating to ongoing compliance requirements, AFSL (Australian financial services licence) requirements and the cost of providing financial advice.”

The level of accountants who stated SMSF advice was not part of their value proposition or it was too complex both declined over the same period from 29 per cent to 23 per cent, and from 35 per cent to 22 per cent respectively.

SMSF accountants who operate under a full licence also indicated their top priorities when selecting investments for SMSF clients would be diversification and capital growth, with 53 per cent labelling these as their main focus.

Capital preservation and liquidity were also ranked highly (48 per cent and 43 per cent respectively), with these four areas being the leading areas of focus in regards to investments over the past three years.

The cost of products fell to its lowest level of consideration in three years, at 20 per cent compared to 33 per cent in 2019 and 2020, and responsible investing spiked from around 6 per cent in 2020 to 25 per cent in 2021.

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