SMSF Advice To be or not to be licensed what this means for you. Nidal Danoun CTA Prosperity Financial Services (PFS Consultancy)

Transcription

1 SMSF Advice To be or not to be licensed what this means for you Nidal Danoun CTA Prosperity Financial Services (PFS Consultancy)

2 2 Disclaimer This presentation is presented by Nidal Danoun from Prosperity Financial Services P/L (PFS Consultancy). The information contained in this presentation is of a general nature and does not constitute advice or recommendations of any kind. Although the information provided in this presentation was obtained from sources considered to be reliable, Prosperity Financial Services P/L does not guarantee that it is accurate or complete. Therefore, you should not rely on this information or use it as the basis for making any investment decisions. Prosperity Financial Services P/L does not accept any liability for any resulting loss or damage suffered by seminar attendees or any other person. This presentation was based on information available as at the date preparing this presentation 10/5/2016). Copyright All rights reserved. The materials in this presentation are copyright may not be resold or reproduced in any manner (except extracts for bona fide study purposes in accordance with the copyright Act) without prior consent of Prosperity Financial Services P/L. Violation of copyright Act is against the law

3 3 Session Outline SMSF Advice To be or not to be licensed what this means for you 30 June 2016 marks the end of the accountants exemption. The new limited licensing framework, your options, tips and traps. Practical post-licensing compliance considerations and how to deal with them effectively. Regulatory view on SMSF advice and the SMSF industry.

4 4 Session Outline The new Regulatory framework for SMSF advisers Removal of the accountants' exemption Transition period to 30 June 2016 Limited AFSL for accountants and SMSF advisers Options to consider Obligation under the licensing regime Interaction with FOFA

5 5 Removal of the Accountants Exemption Removed from 1 July 2016 Need to be licensed to recommend establishing or winding up an SMSF 3 year transition period to 30 June 2016 Facilitated for holders of public practice certificate Limited Australian Financial Services Licence (AFSL) framework from 1 July 2013

6 6 Limited AFSL for accountants and SMSF advisers Application for a limited AFSL ASIC -Information sheet 179 Scope of the limited AFSL Financial product advice Class of product advice ASIC regulatory guides RG1, RG2, RG3, RG175, RG146, RG104, RG105, etc.

7 Licensing Options to Consider Possible options include: 1. Apply for a limited AFSL ASIC Information sheet 179 OR 2. Apply for a full AFSL (if you are eligible) 3. Become an Authorised Representative of a licensee 4. Referral arrangement with a licensed adviser Issues to consider Autonomy, flexibility, independence costs, time, added compliance, risk training, expertise and fit with your practice Costs associated with the licensing framework 7

8 Obligation under the licensing regime Issues to consider The advice process Training PI Insurance Risk and compliance framework Responsible manager (RG105) Streamlined process transition period Policies and procedures External Dispute Resolution (EDR) Disclosure requirement Documentation FSG, SOA, etc. Level of service

9 9 Post-licensing compliance considerations Practical post-licensing compliance considerations and how to deal with them effectively. FOFA application and Interaction with the limited AFSL Issues to consider include: Conflicted remuneration Best interest duty obligations Safe Harbour Substance over form However, the form is Important

10 10 Questions?

11 Nidal Danoun, Prosperity Financial Services (PFS Consultancy) Disclaimer: The material and opinions in this paper are those of the author and not those of The Tax Institute. The Tax Institute did not review the contents of this presentation and does not have any view as to its accuracy. The material and opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.

12 SMSF Advice To Be Or Not To Be Licensed: What This Means For You Gordon D Mackenzie FTIA Tax and Business Law UNSW

13 Aspects of licensing Academic observations about SMSF Licensing (But I was Tech Services Director at AMP Ltd a long time ago, with 30 professional staff servicing 3000 advisers, so, maybe, only slightly academic?) 1. Effect of financial advice-what do clients get out of it? 2. Regulatory environment: clients can make a confident and informed financial decision 3. Best interest duty: main regulatory burden. Deal breaker in getting licensed? 4. SMSF market: reasons people set up/close a SMSF.

14 1. Effect of financial advice Three effects: Financial effect- avoid negative outcomes or high risk-adjusted returns, a circuit breaker against bad behaviour Process effect- changing client behaviour through a financial plan Psychological effect- confident retirement or general financial wellbeing No empirical research (worldwide) of absolute financial benefit - too difficult to measure value added, too many variables

15 2. How is financial advice regulated? Overall objective of the rules: Foster confident and informed decision making The rules push investment risk onto consumer, but sets them up to be engaged in investing Australians are now all financial citizens Super Guarantee, Demutualisations (AMP s alone created 1m+ shareholders), Government privatisations Product changes (investment life policies were a claim on the insurer, now managed funds are direct exposure to underlying investments)

16 2. How is financial advice regulated? Restrictive rules- control adviser s behaviour to mitigate risks to client Facilitative rules fosters participation by consumers in investing How is that achieved: Players are licensed- controls their financial soundness, competency, honesty and fairness, quality of performance Adviser conduct heavily regulated-best interest duty+ - complete due diligence (fact find/risk profile), identify subject, appropriate advice, document that it has been done (Statement of Advice) Disclosure rules- puts investors in best position to be engaged and make confident decisions

17 3. Best interest duty General obligation to act in the client s best interest (Section 961B (1) Corporations Act) Safe harbour rules that will satisfy the general best interest duty (Section 961B(2) Corporations Act) Resolves asymmetry of information- adviser has all the knowledge- so it avoids conflict prevents adviser acting in their best interest, not the investor FOFA s response to misselling inappropriate advice and fraud

18 3. Best interest duty Schematically, the best interest duty means: 1. What is the clients financial situation, objectives and needs (fact find/due diligence) 2. What are you advising them about and what are their objectives, financial situation and needs relevant to that 3. Do you have everything that is needed for that and is it accurate 4. Are you competent to give that advice 5. Have you investigated what you are going to recommend 6. Is what you recommend appropriate to the client s relevant circumstances that you have identified Onerous?

19 4. Who sets up a SM SF and why? Top 4 reasons for starting a SMSF: Choose investments Manage my fund TTR Choose individual equities Overall reasons: Manage own investments (control) Get involved in fund administration After starting a SMSF most people: Invest in Australian equities (imputation credits) Increase contributions Move to safer investments (Research 2016:Prf. S Thorp et al)

20 4. Who sets up a SM SF and why? Whose idea was it to set up a SMSF? Financial Planner 33% Accountants 24% Mine 19% Family/friend 11% SMSF administrator 5% Whose idea was it to close a SMSF? Mine 54% Financial Planner 17% Accountant 13%

21 Aspects of licensing 1. Effect of financial advice: Financial, Process, Psychological 2. Regulatory environment: clients can make a confident and informed financial decision 3. Best interest duty: main regulatory burden. Deal breaker in getting licensed? 4. SMSF market: will not being licensed change set ups?

22 SMSF Advice To be or not to be Hugh Elvy Chartered Accountants Australia and New Zealand

23 Revisit Background What is being removed? Accountants exemption very narrow Recommend set up/ wind up of a SMSF From 1 July 2016 options still exist Recognised accountants will be unable to access the transition arrangement licensees in the market. Challenging to obtain objective information

24 Post July 2016 Services Key issues for professional accountants: Clarify client service offering Clients want more Stay relevant and competitive Consider advice and services wider than what you have always done Look to enhance current service offering with advisory services Consider charging/ pricing models

25 Licensed Business model Irrespective if you operate your own limited licence or operate under another entity s licence Corporations Act obligations apply. For example Compliance framework Disclosure documentation FSG and SOA Best Interests duty External dispute resolution You will need to review processes and procedures Be aware of APES 230 Financial Planning Services

26 Remaining unlicensed Activities/ services not deemed to be financial product advice or a financial service. Factual information Traditional accounting advice and services Eg Business planning, administration, compliance advice Taxation advice & services (Disclaimer reminder) Execution only services

27 Remaining unlicensed Ensure you understand what you can continue to do while unlicensed Ensure your clients understand what services and advice you are providing Ensure appropriate use of disclaimers and documentation Check your PI policy. What are the implications for straying outside the unlicensed parameters?

28 Summary Options still exist 30 June 2016 is not the end. Review client service offering. Ensure you and your clients understand what you are offering. Stay relevant.

29 Hugh Elvy, Chartered Accountants Australia and New Zealand Disclaimer: The material and opinions in this paper are those of the author and not those of The Tax Institute. The Tax Institute did not review the contents of this presentation and does not have any view as to its accuracy. The material and opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.