Robo-advice for SMSFs: what accountants need to know

Accountants providing SMSF services need to be aware of the potential challenges of using digital advice tools.

Accountants referring clients to robo-advice tools need to be wary of licensing constraints.

The “accountants’ exemption”, which previously allowed recognised accountants without an AFS licence to give financial product advice about acquiring or disposing of an SMSF, was repealed on 1 July 2016. This means the limited Australian Financial Services (AFS) licence regime is now in full swing and accountants have put in place various arrangements to continue providing SMSF-related services to their clients. 

While some have chosen to apply for a limited AFS licence, others have become representatives of other AFS licensees. Others provide only those services that they are permitted to provide under remaining licensing exemptions – staying outside the AFS licensing regime. 

While ASIC supports all of these approaches, we need to ensure that those operating outside the AFS licensing regime – unlicensed accountants – are aware of their responsibilities.

Use of digital advice tools by accountants without AFS licence authorisations

We understand that a number of accountants who have chosen to operate without an AFS licence authorisation have entered into arrangements with digital financial advice providers (or “robo-advisers”) to allow their clients to access digital advice about SMSFs. 

Under these arrangements, accountants refer their clients who need financial product advice (for example, about whether or not to establish an SMSF), to a digital advice tool which can provide that advice. 

These arrangements allow unlicensed accountants to continue to provide SMSF-related services to their clients, even where they need financial product advice. 

We want to point out a couple of important things that accountants need to be aware of before entering into these arrangements. 

Straying into activities requiring an AFS licence authorisation

While digital advice providers might indicate that their tools can be used in such a way that unlicensed accountants who refer clients to the tools would not be providing financial services, this may not always be the case. 

Whether an unlicensed accountant is providing financial services for which an AFS licence is required will depend on each interaction that accountants have with their clients.  

Example

An accountant might tell its client that a digital advice provider can give the client advice about whether an SMSF is appropriate for them. If the accountant simply gives the client contact details for that digital advice provider (e.g., a website address), this will not constitute financial product advice. In this instance, accountants should disclose to their client the benefits or commissions they may receive in relation to the advice

On the other hand, an accountant might: 

  • lead their client through the tool and restate the advice that the tool provides about whether or not an SMSF is appropriate for the client; or 
  • indicate that he or she agrees or disagrees with that advice. 

Both circumstances will likely involve the provision of financial product advice and the accountant would need to be covered by an AFS licence to provide it.

For more information about what kinds of SMSF-related services accountants can provide if they are not covered by an AFS licence, ASIC has prepared Information Sheet 216 AFS licensing requirements for accountants who provide SMSF services (INFO 216). It provides practical guidance about how the AFS licensing regime applies to SMSF services provided by accountants. 

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Accountants recommending digital advice tools

Accountants tend to enjoy the trust of their clients, and that is an important part of the accountant-client relationship. Because of this trust, clients can often give great weight to any recommendation made by their accountants. 

They may view a referral to a digital advice tool as their accountant’s “stamp of approval” for that tool and the digital advice provider who operates it. 

For this reason, accountants should be comfortable that any tool they refer their clients to meets the high standards expected of digital advice providers. This is especially true of tools that advise consumers on one of the most significant decisions they can make in relation to their retirement savings– the decision to establish an SMSF. 

ASIC’s MoneySmart website has some helpful guidance on using digital or robo-advice tools, which sets out some of the things to consider before getting digital advice more generally.

Any sound recommendation on whether to establish an SMSF must involve several considerations. 

ASIC has provided guidance on some of these considerations in Information Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks (INFO 205) and in Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206). 

We also encourage accountants to test any digital advice tools they wish to refer clients to against the criteria we have set in INFO 205 and INFO 206. 

For instance, ASIC expects consumers seeking advice about whether to establish an SMSF to be made aware of the risks and challenges we identify in INFO 205. They include: 

  • the potential lack of statutory compensation for SMSFs
  • the risk of losing insurance cover when transferring out of an existing superannuation fund 
  • limited access to complaints mechanisms 
  • the obligations of an SMSF trustee and the time and skills that they need to devote to operating an SMSF
  • the need to consider an exit strategy from an SMSF.
INFO 206 sets out our expectation that advice about whether to establish an SMSF should address:
  • the cost-effectiveness of an SMSF
  • the costs that are expected to be incurred in establishing, operating and winding up an SMSF – some of these are optional, but many are unavoidable. 

While ASIC supports the development of a healthy and robust digital advice market, we have made it clear that we expect nothing less from digital advisers than the high standards we expects of traditional (i.e., non-digital) financial advisers. 

Digital advice tools that do not address the issues we have listed above are unlikely to be providing advice that is in your clients’ best interests.

ASIC and the Australian Taxation Office working together

ASIC and the ATO jointly play a significant role in the regulation of SMSFs. We recently revised our strategic priorities for joint work to include a specific priority around conduct in respect of SMSFs. 

To further this priority, we have worked with the ATO to establish a working group to examine and consider the scope of existing automated online SMSF tools and establishment platforms with a view to assessing any potential risks that these arrangements might create. 

As the regulator of SMSFs, the ATO is equally concerned to ensure that individuals obtain informed advice and information from an appropriately qualified and licensed professional prior to establishing an SMSF.

There are significant regulatory obligations that the superannuation and taxation laws place upon SMSF trustees  and it is critical that individuals contemplating setting up an SMSF understand what they are required to do in order to ensure that their superannuation savings are protected for their future retirement.

ASIC doesn’t prescribe the approach accountants should take to providing SMSF-related services and we support accountants’ right to choose the model that is right for them, their business and their clients. 

However, we do believe that all accountants providing SMSF services need to be aware of the potential challenges of the approach they choose. 

Louise Macaulay and Joanna Bird are senior executive leaders of the financial advisers team at the Australian Securities and Investments Commission.

Read next: Countdown to 1 July super changes.


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