The Financial Planning Association of Australia (FPA) will fight hard in the coming months to make sure that plans to regulate the tax advice given by financial planners do not impose an unnecessary compliance burden on individuals or practices.
The news that financial planners will not be fully regulated by the Tax Practitioners Board (TPB) has been met with relief within the industry. Since November 2010, dual regulation had been a very real threat.
Given that financial planners face yet another round of regulation and competency assessments, the outcome is not as onerous as might have been expected. Under an options paper released in late 2010, it was proposed that the Australian Securities and Investments Commission (ASIC) and, to the extent that financial planners give advice on tax-related issues, the TPB jointly regulate planners. Planners could have been required to comply with the full range of TPB standards.
Such a scenario would have been a nightmare, the chief executive of the Financial Planning Association of Australia (FPA), Mark Rantall says.
Under a compromise agreement reached between the financial planning industry, tax and accounting bodies, Treasury, the TPB and ASIC, financial planners will still be regulated solely by ASIC. But they will be required to meet yet-to-be-determined standards, set by the TPB but administered by ASIC.
“What we’re seeking to avoid is a back-door registration process.”
Having fended off the prospect of a dual-regulator approach, Rantall says the aim must be to make sure that any regulation administered by ASIC isn’t too onerous for planners and that it only applies to activities that planners are actually engaged in.
The details of the regulations will be thrashed out between now and about the end of June.
“That’s still a work in progress,” Rantall told Professional Planner Online.
“What’s important here is that we look at the different roles that financial planners play, the work that they do, and this piece of work extends beyond financial planners to anyone who is licensed or who gives any form or any sort of tax advice.”
Rantall says that includes financial planners working in banks and super funds.
“My sense is that we’ll need to look at the various roles undertaken by all of those [parties] and determine what competencies are required.
“What we’re seeking to avoid is a back-door registration process.”
Under the agreement thrashed out in Canberra last week, ASIC will remain the principal regulator of financial planners. ASIC and the TPB will liaise, to determine appropriate regulation of financial planners when it comes to tax issues.
The FPA has successfully argued that it’s not necessary for full regulatory oversight by the TPB, because most financial planners do not do things like lodge clients’ tax returns or deal directly with the ATO on tax issues.
In a statement issued last week, the FPA stressed that “contrary to initial press reports, today’s announcement will not force financial planners to adhere to standards set by the Tax Practitioners Board, but rather competency levels will be established by ASIC, in consultation with the Tax Practitioners Board”.
The Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said the players have settled on four key principles that will guide how the regulation of financial planners will be formulated. (See box.)
In some quarters the push to have the TPB regulate financial planners was seen as some sort of payback or quid pro quo for the push to have the accountants’ licensing exemption abolished, as proposed in the Future of Financial Advice (FoFA) package.
Rantall says the FPA ran a rearguard action to make sure financial planners were not required to be fully registered and fully regulated by the TPB.
The arrangement seems to have met with the approval of key accounting bodies.
Graham Meyer, chief executive of the Institute of Chartered Accountants in Australia (ICA), said in a statement that “the only way to ensure consistent monitoring of tax advice to Australians, equal access to consumer safeguards and improved public confidence in taxation services, is to set and apply the same rules for anyone involved in the delivery of taxation services to the public”.
Meyer said the aim of the agreement is to “retain ASIC as a ‘front of house’ regulator with the TPB setting the standards for education and training for all financial planners”.
He said licensed financial planners are regulated by ASIC and any tax related services they provide are currently outside the scope of the Tax Agent Services Regime, which came into effect in March 2010.
“While there is still a lot of detail to work through, this is a great outcome because it is another positive step in raising the bar for the quality of financial advisory and taxation services in Australia,” he said.
The chief executive of the National Institute of Accountants (NIA), Andrew Conway, said “it’s been a bugbear for accountants that licensed financial planners have been excluded from Tax Agent Services Regime since it came into operation in March 2010”.
“The current proposal will achieve the similar outcome without the duplication of resources”
“We have come a long way since the Government began the consultation process,” Conway said.
“While we recognise that the Financial Planners ideally should have been registered under the Tax Agents Services Act Regime the current proposal will achieve the similar outcome without the duplication of resources.”
And the chief executive of CPA Australia, Alex Malley, welcomed the broad agreement that has been achieved on the key principles.
“The provision of tax advice is a highly specialised service requiring a high level of skill, knowledge and experience and it is important to have the right regulatory framework in place,” Malley said.
“It is CPA Australia’s long-held view that financial planners who give tax advice, be subject to the same standards and controls that apply to all other registered tax agents. The broad principles as outlined by the minister, agreed to at this meeting represent important progress in what has been a protracted issue.”
Principles to underpin the development of new regulatory arrangements:
• Consumer protection is a key consideration.
• Competency of financial planners to provide tax services is a means of ensuring that quality advice is provided and that consumers of these services are protected.
• ASIC would, as far as practicable, be the key agency for interacting with financial planners and consumers in relation to tax services provided as part of financial planning services. This would minimise duplication and red tape.
• ASIC would be supported by a strong and collaborative arrangement with the Tax Practitioners Board to utilise expertise (tax and finance), and ensure that streamlined approaches can be implemented as far as possible.
These principles will provide a solid basis for further consultation in relation to competencies and the scope of tax agent services that financial planners could provide under a new model.
Source: Minister’s press release.
I totally agree with Peter Vickers – FPA Sooks was the word that came to my mind.
Public Accountants who have huge hurdles to leap for TPB registration have just as many hurdles including costs as financial planners to be RG146 compliant. The Financial Planning industry needs to be cleaned up and unless ASIC has the same standards for Financial Planners as Registered Tax Agents, no more progress will have been made in making the industry professional. ASIC has no proud history to point to of enforcing standards.
What a bunch of wimps the FPA are.
Us public accounants have to be registered with both the TPB and ASIC. In my case I am both a member of the FPA and ICAA.
If it is necessary for me then I see no reason that it should not be necessary for everyone.
My counter arugument is that the ICAA should ensure that its CA program is comprehensive enough to cover all aspects including reg 146 thus eleiminating the need to do extra training which tends to be extremely low level for reg 146.
I have also argued for the reinstatement of the former Public Accountants Registation that registers a public accountant and authorises him to act as a holder of a practicing certificate, tax agent, finacial planner, auditor, credit consultant, liquidator and chief bottle washer and thus saves numerous registrations.