One law to rule them all

The Financial Planning Association of Australia (FPA) has called for uniform qualifications and competency standards for any­one who advises on the setting up and running of self-managed superannuation funds (SMSFs).

The FPA’s call, contained in a submission to a review of SMSF governance, is echoed by the Association of Superannuation Funds of Australia (ASFA), also in a submission to the review.

The review, announced in February by the Min­ister for Superannuation and Corporate Law, Sena­tor Nick Sherry, aims to “ensure that trustees, and potential trustees, are aware of the risks involved and [are] provided [with] the skills necessary to run a superannuation fund in a prudent fashion”.

The FPA says the aim of any overhaul of SMSF regulation should be to ensure that SMSF members may be confident of receiving comprehen­sive and competent advice on their fund, regardless of where they go to get that advice.

The FPA says a removal of the exemption that accountants receive under the Financial Services Reform (FSR) Act, is a vital step in the process. The FPA says that accountants can currently give limited advice on SMSFs without having to obtain appropriate financial planning competence and qualifications.

“It’s about a level playing field,” says Jo-Anne Bloch, chief executive of the FPA.

“What we’re saying is that if people are going to get advice, they should be getting it from someone who has a minimum level of qualification.

“Professional designation certainly doesn’t qualify [someone], and being an accountant doesn’t qualify [someone], either, because the business of financial planning is very different to the business of accounting.

“While we welcome accountants being financial planners, and it’s an obvious combination, it is a combination – it’s a separate skill set, not some­thing you would just dabble in.”

Bloch says uniform standards would help over­come the situation where an SMSF member gets advice on how to establish and structure a fund, but is then left to their own devices when it comes to establishing a sound investment policy, and imple­menting that policy.

“I think that you find there are a large number of self-managed super funds set up by accountants because they don’t frankly have any other options,” Bloch says.

“I think you find asset allocation in some cases may be as a result of inadequate advice, or no advice. So someone gets an SMSF set up, and then they’re on their own.

“When you look at some of the disasters that have befallen the investing public, they are at­tributable to unlicensed advisers and accountants – though that’s not to distract from the fact that financial planners have been involved.”

Lest accountants cry foul over the FPA’s ap­parent desire to pull them into line, Bloch says the FPA’s philosophy applies equally to its own mem­bers. She says financial planners must be properly and appropriately qualified for any and all advice and services they provide.

For example, “financial planners should only be providing tax advice on the basis that they are prop­erly qualified to do so”, Bloch says. “It’s no different.”

In its submission, the FPA says it “strongly support[s] a level playing field” in the area of advice provided to trustees.

“People who provide financial advice should have consistent, benchmarked standards irrespec­tive of their professional background,” it says.

“Only then can it be guaranteed that the advice provided to SMSF trustees is appropriate and of sufficient quality, and that clients have been pro­vided with comprehensive and relevant advice.

“It is essential that advice should meet the con­sistent requirements that operate within a uniform licensing regime.”

The FPA says the Australian Taxation Office remains the most appropriate body to regulate SMSFs; there should not be any “entry hurdles” to setting up an SMSF, such as fund size or the make-up of the fund’s assets; and SMSF trustees should themselves be subject to minimum educational standards.

ASFA says that 85 per cent of all new SMSFs are set up with “the help of tax agents or accoun­tants”.

“There exists ample anecdotal evidence that suggests a number of individuals are being con­vinced to establish an SMSF inappropriately,” it says.

ASFA recommends “the regulatory framework for any person providing a recommendation in rela­tion to the establishment of an SMSF or becoming a member of an SMSF be subject to Australian Financial Services Licence (AFSL) requirements”.

ASFA also says that trustees themselves should meet “certain knowledge and experience thresholds”.

“These thresholds should be embodied in a special licence, registration or certificate and should cover minimum financial literacy, investment and legal obligations,” ASFA says.