Remember the 1982 movie The Year of Living Dangerously starring a young Mel Gibson and directed by Peter Weir? The story follows young Australian reporter Guy Hamilton, who arrives fresh in Indonesia on the eve of the 1965 communist party coup and who has to navigate his way through the political turmoil of that period. Well, at the risk of being accused of hyperbole, for SMSF specialist advisers, 2013 will certainly be the year of living dangerously.
Since SPAA began representing advisers in the SMSF space 10 years ago, I can never remember a year when so many licensing changes were in the pipeline. Although advisers know it’s coming and, thankfully, the majority will have the skill set and professionalism to handle the changes, it will still demand time and resources to come to grips with these new licensing environments, whether its auditors, financial advisers or accountants.
From SPAA’s perspective, these changes have merit. Although we still might have some quibbles at the edges, their overall thrust does, in our opinion, underpin the professionalism our rapidly growing industry both needs and deserves. As we were reminded – yet again – by the latest Australian Taxation Office (ATO) figures, this sector is growing strongly and, more importantly, responsibly.
Responsibly. That point is important. When the figures for 2011/12 were released showing the number of net new funds established was 35,276 compared with 28,031 for the previous year to 30 June 2011, it was that headline number that got attention. What got less attention was the fact that although the 2011/12 figure was the highest recorded number since these reports began in 2008, the percentage increase in the number of net establishments compared with previous years appeared to be slowing, with a 26 per cent increase for 2012 compared to an 84 per cent increase in 2011. When coupled with the fact that the average SMSF balance is growing, it would indicate suggestions about the sector’s growth being unsustainable simply lack evidence.
Based on these numbers, there can be little argument the demand by SMSF trustees for specialist advisers will grow apace, and, as I have said, the licensing changes will help underpin this. What it also means, of course, is that it will be imperative for specialist advisers to attain an appropriate level of professional competence; that will be the key to their success.
In the case of auditors, it means they will have to decide whether they wish to continue auditing SMSFs and remain part of this rapidly changing industry. If they do decide to stay, they will need to get their application to ASIC by April so they will be registered in time for the 1 July start date. As part of this registration process they will need to audit at least 20 funds and meet certain educational requirements, of which the SPAA SSAud designation is an option.
Accountants, too, have some thinking to do. Those who provide advice on SMSFs have to decide whether they apply for a limited licence that takes effect from 1 July or stay under the current system until 2016. It’s been estimated the government’s new form of financial advice licence could see up to 10,000 accountants providing a broader range of advice on SMSFs than they do now.
There was much debate around the limited licence. But it is SPAA’s considered view that the government’s decision to opt for a limited licence is an excellent and practical compromise between the current exemption arrangements that are highly restrictive and the provision of fully licensed financial advice, including the recommendation of financial products, an area, in our opinion, that accountants don’t want to be involved with.
For financial planners, those who provide tax advice in the context of providing financial advice will also feel some heat with proposed changes to bring them within the tax agent regime over a three-year period beginning 1 July. It will certainly require some of them to upgrade their skill set as they will have to meet education and experience requirements, satisfy a fitness and propriety test, and follow an approved code of conduct.
SPAA is confident the vast majority of its members are across these changes, appreciating that these new environments will reward those advisers who embrace this change, confident in the knowledge
it will enable them to better service their clients. If they need any encouragement on this score, they simply need to read the survey SPAA and Vanguard jointly commissioned that was released late last year where a key finding was the willingness of SMSF trustees to pay extra for those advisers who gave sound strategic advice.