Financial planners will be forced to undergo extra training to give advice on taxation issues under new measures announced by Assistant Treasurer Bill Shorten, as the Government steps up efforts to protect consumers seeking financial advice.
Under the measures, financial planners will need to get extra qualifications and comply with standards set by the Tax Practitioners Board. The implementation of the new rules for financial planners will be overseen by the Australian Securities and Investment Commission.
There will be a sliding scale of tax qualification requirements for planners, depending on the level of taxation advice to be given.
Shorten said that talks would continue with both the accounting and financial planning sectors, who are both concerned the other is trying to lure customers away. Accountants generally believe that financial planners aren’t sufficiently experienced to deal with tax matters, while financial planners say accountants shouldn’t be the only people allowed to give simple tax advice.
Last September, SmartCompany reported that accountants were undertaking further qualifications allowing them to give advice on self-managed superfunds, as they attempted to take back lost ground stolen by the financial planning industry.
Bill Shorten said told the Australian Financial Review that the proposed new laws represented an ‘outbreak of peace’ between the two industries.
But both sectors' governing bodies seemed to disagree on the outcome of Shorten's latest round of industry talks.
CEO of the Financial Planners Association, Mark Rantall, believes that the new rules will add cost, confusion and complexity for consumers.
"We support the lifting of competency standards for financial planners in all areas of advice including tax but do not support duplication of licensing and registration that will add another layer of compliance and ultimately push up the cost of advice for all Australians," Rantall said.
But CPA Australia CEO Alex Malley backed the move.
“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,” he said.
“It is critical that the result be a regulatory framework with transparent consumer protection measures, that is consistent and that avoid duplication and unnecessary red tape” said Malley.
Geoff Gray, a director Pitcher Partners says the new laws will lead to changes within the industry.
“Advisers will go one of two ways. They will do the extra training and become compliant, or minimise the services they provide. If they do the latter, they’ll force clients to then see two professionals. That will be more expensive and time consuming for clients, and those advisors would eventually lose business.”
Gray expects the impact on his firm’s planners to be minimal.
“Our financial advisers already do 80 hours of training per year. Whilst some changes would be made to the courses they undertake, we would incorporate these taxation requirements and the effects on our business would be minimal”.
These new regulations will provide another headache for the financial services industry that has been feeling the pain of the global financial crisis, especially for smaller operators of whom many rely purely on commissions for income.
The one set of further regulations maybe the final straw for some advisors, especially those nearing retirement or contemplating selling their business. Other recent laws to impact the industry include the ban on trailing commissions from 2012 and new conditions that restrict any fees be taken without a new contract being signed each year.
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