Opinion piece written by John Maroney, CEO, SMSF Association
First published in Financial Review on 23 February 2023. Licensed by Copyright Agency.
The Quality of Advice Review has a lot of good stuff, but the conversation is ongoing for specialist advisers and accountants.
The final report of the Quality of Advice Review has much to recommend it. Among its 13 recommendations there is much that will help cut the red tape that has made financial advice costly, inaccessible, and complex, confusing advisers and consumers alike.
Replacing statements of advice, changing fee arrangements and amending consent requirements for wholesale clients are all steps in the right direction that won’t diminish consumer protections. But they are only first steps.
Much more needs to be done, especially as it relates to specialist advisers (many of whom advise self-managed super funds) and accountants (more about them later).
A core theme of this report is to give institutions and large superannuation funds the green light to provide personal advice to consumers. Indeed, if these proposals get legislative approval, it will permit advice to be given by employees in these organisations who are not qualified financial advisers.
The paper posits that this group is “ideally positioned” to provide incidental, simple, and limited advice to clients under the “good advice” proposal.
At one level, this solution makes sense. Currently, the advice sector cannot meet the needs of consumers that need ready access to simple, quality advice.
So, to open it up to the large superannuation funds, in particular, will allow them to better meet their existing duties, including the retirement income covenant. The key will be having the right policy and regulatory settings.
Limited licence on last legs
But at another level, this solution is based on a false premise. The final report suggests that simple and limited advice are services that professional advisers don’t wish to provide – an underlying theme in the report. We would dispute this.
The reality is that it’s not that advisers don’t want to provide single issue or scoped advice, quite the opposite. But in the current regulatory environment it is very difficult – indeed, almost impossible – for advisers to provide such advice. It is simply not cost-effective for consumers to access simple advice in this way.
Yet access to advice in this way is extremely important for many SMSF trustees who may require advice on a particular issue at a specific point in time. The opportunity for them to receive such advice has been missed.
The other weakness in this report is how accountants have been left out in the cold. Yet here we have a pool of specialists ideally placed to fill the crucial advice gap.
The report states that “the regulatory regime must allow other advice providers to provide personal advice to consumers to increase the accessibility of personal advice”. But this and the “good advice” principles do not extend to accountants.
The reality is that the accountants’ limited advice model is a dying model. Its current framework prohibits most accountants from giving advice – despite the tailored limited licence model. As accountants continue to exit licensing, this model will disappear completely and, with it, essential advice services.
The limited licence model was established specifically to address the needs of accountants seeking to provide SMSF and superannuation advice with the repeal of the “accountants’ exemption” in 2016.
An alternative model is needed as a priority. It should address both the advice gap needs of clients and the conflict between what is the provision of a tax agent service and financial advice.
The latter issue is not understood or acknowledged and is a serious issue littered with complexities.
For accountants this highlights the flaws in a system when successive sector reforms have sought to treat the whole advice ecosystem as one and the same. The reality is that it is not a single basket of goods. It is a complex system with a variety of stakeholders and service providers.
The review, which was limited in its terms of reference, was unable to fully consider many issues. At the head of our wish list would be a detailed examination of the future role of specialist advisers and accountants in the giving of advice, especially as it relates to an SMSF sector that has assets under management approaching $900 billion.
Certainly, more than 1.1 million SMSF members could benefit significantly from having greater flexibility in being able to get tailored advice from their specialist SMSF advisers and accountants.