The dilemma facing practitioners of the deadline for the accountant’s self-managed super fund (SMSF) advice exemption ceasing on July 1, 2016, is not a new one. A major overhaul of the financial services industry following a financial system inquiry chaired by Stan Wallis in 1996 created a similar dilemma for some accountants.
My own practice has been built, and rebuilt on occasions, on combating one of the major complaints clients have about accountants. That is, “they never make suggestions on how to improve my tax and financial position”. Having regarded myself as an accountant and not a tax agent, I was faced with a dilemma similar to the one facing accountants today.
One of the best definitions of what an accountant is can be found in the online business dictionary. It states: “Accountants prepare annual reports and financial statements for planning and decision-making, and advise on tax laws and investment opportunities.”
When it comes to a tax agent, the generally accepted definition is someone who prepares returns of income required to be filed by 10 or more taxpayers.
It is not hard to work out that the difference between an accountant and a tax agent is analysis of financial statements and tax returns, and the offering of advice to clients on tax planning and investment opportunities.
Only real option
When the new regulations were introduced in relation to providing financial advice, and not wanting to hand my clients over to someone else, my only real option was to use similar grandfathering provisions that are available now: enrol in and pass a DFP8 Advanced Financial Planning course, gain the qualification of a Certified Financial Planner, become a proper authority holder with a financial service licensee, and continue to provide broad advice to my clients on not only tax-planning strategies but also retirement and investing.
With less than four months to go until the accountant’s exemption ceases, accountants who have not yet made a decision have the following choices:
- Obtain your own limited Australian financial services (AFS) licence
- Attain your own full AFS licence
- Become an authorised representative of another entity’s licence
- Recruit a financial planner and form a joint venture
- Refer clients to a licensed advisor.
Unless a practice is currently a specialist SMSF practice, or wanting to become one, the cost of obtaining and maintaining a limited AFS licence or a full AFS licence tends to make these less attractive choices.
Also, unless the firm wants to develop a financial planning arm, joint venturing with an in-house financial planner is also not really an option.
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RG146 compliance
For practitioners who want to continue advising clients on whether they should have an SMSF, and regard themselves as accountants and not tax agents, the only option is to become RG 146 compliant and become an authorised representative of an AFS licence holder. As to choosing what will be the best AFS licence holder to sign with is a subject for an article on its own.
What should not be an option is to refer clients to a licensed advisor. This results in effectively handing your clients over to a third party for SMSF and future advice, putting your ongoing relationship with the clients in jeopardy, and subconsciously deciding that you are a tax agent.
There is a final option that does not require any licensing but means an accountant helps their clients make an informed choice about whether to have an SMSF or not. This involves providing a decision-making tree that leads clients to making a decision that suits them, and not a third party that has a vested interest in the decision.
