The Pulse

As readers are aware, the ongoing review by the government in the provision of financial services continues.

One of the issues is the removal of exemption that permits accountants to discuss issues relating to pros and cons and the establishment of self managed superannuation funds. It appears that the only way a practitioner could have the holistic discussion is to ensure that they will be licensed by either establishing their own licence or operating as an authorised representative of a dealer.

However, it is not as simple as that. A financial services licence requires a different process to be adopted. We think this will create a confusing situation for both accountants and clients.

We have consistently advocated that accountants should conduct regular holistic needs review interviews to unlock the issues and concerns facing clients so that the accountant can discuss with clients solutions to those issues and concerns. The accountant is not providing recommendations merely outlining what the possible solutions maybe which may then lead to providing advice or services.

The loss of the exemption for accountants disrupts this process.  What now seems to be required is that as soon as the accountant wishes to outline any information in relation to, for example, self-managed superannuation funds, the financial services regime kicks in and the processes demanded by the licensee (dealer group) must be followed. That generally means, for example, that a fact find is required which, for accountants discussing the pros and cons of self managed super with their clients, is a waste of time since they already have a good knowledge of their client’s affairs. The client then gets confused and frustrated as to why the accountant must go through the seemingly unnecessary process.

Accountants are in a unique position. They have an ongoing relationship with their clients over a long period of time. Generally they hold a strongest position of trust in respect of a client’s financial affairs. The processes demanded by the financial services regime assumes little, if any, prior knowledge or history of the client’s affairs. This is inappropriate for the vast majority of accountant / client relationships. We accept that when services move beyond general discussions to the advice stage a rigorous process is required to ensure that the advice is appropriate for the client’s circumstances. However, requiring these rigorous processes before the advice stage where the accountant is discussing generally the various strategies a client might adopt will hamper the ability for accountants engage effectively with their clients.

Accountants will need to develop split personalities with a sixth sense to detect which personality should be used as they move through a holistic discussion with a client regarding their business and personal financial affairs.

Hopefully, the accounting bodies and the dealer groups will manage to convince the minister that a better regime is needed to enable accountants to work closely with their clients without the imposition of unnecessary processes. If that doesn’t come about then the hope must be that the dealer groups can work with the profession to come to a practical solution to ensure that clients and accountants can engage in holistic discussions regarding their affairs and possible solutions so that the licensing regime only kicks in as the service moves to the advice stage.

David Smith | Director – Smithink 2020