Government urged to cut the red tape afflicting financial advice

18 August 2020

SMSF Association Media Release

To make professional financial advice more affordable and accessible in a post COVID-19 recovery, the SMSF Association is calling on the Federal Government to reduce red tape around the delivery of financial advice.

The peak association representing the SMSF sector has used its supplementary 2020-21 Budget submission to again push for a simplification of the regulatory framework for financial advice, arguing such a change can play an important role in stimulating the economy post the COVID-19 pandemic.

Commenting on the supplementary budget submission, Association CEO John Maroney says: “We support the Federal Government’s stated ambition to grow the Australian economy out of debt in the wake of the COVID-19 induced recession – and cutting the red tape that is stifling the financial advice sector for consumers and advisers should be integral to this goal.”
Improving the financial advice framework is just one reform the Federal Government can implement to make financial advice more accessible and affordable for consumers, with this submission outlining seven other areas where red tape can be reduced.

They are:

  • Providing financial advisers access to superannuation tax portals;
  • Streamlining total superannuation balance thresholds;
  • Improving superannuation residency rules for SMSFs;
  • Repealing the work test;
  • Providing a practical approach to non-geared unit trust breaches;
  • Introducing an amnesty to convert legacy pensions to modern products;
  • Introducing an effective spousal equalisation measure.

Maroney says: “We believe finding a solution to the issue about how SMSF and superannuation advice and services fit into the financial advice regulatory framework for accountants, financial advisers and superannuation trustees is an important and necessary first step.”

The Association believes the limited licence framework, which was implemented for accountants in 2016, has failed and should be removed and transitioned to a new consumer-centric framework.

Maroney says the desired policy outcomes from introducing limited licensing have not been achieved. Individuals have unmet financial advice needs, financial advisers face high regulatory costs and both accountants and financial advisers are strangled by regulation.

“Currently, SMSF trustees who wish to seek simple SMSF advice are either required to seek formal costly financial advice from a licensed financial adviser or must act without advice. This means there are important unmet SMSF advice needs in the market,” Maroney says.

The Association believes the ability for professionals to provide specific single-issue advice or “scaled advice” is extremely limited and this limitation particularly affects super advice.

“The complex limited licence framework for SMSF accountants and advisers, the carve out for intra-fund advice for superannuation trustees and the lack of clarity around scaled advice for fully licenced financial advisers are all evidence of this fact.

“An individual who seeks superannuation and retirement advice, whether it be from a financial adviser, accountant or superannuation trustee, should receive high quality and affordable advice with the same meaningful disclosure.

“In our opinion, therefore, providing a new overarching regulatory framework for superannuation financial advice is key to this process,” Maroney says.

To read the SMSF Association’s supplementary 2020-21 Budget submission click here.