Point of view: Steps to advising on SMSFs

Advisersand accountants want to know what they have to do in order to be able to continue to provide advice in the area of self-managed superannuation funds (SMSFs).

The Corporations Act

The Corporations Act requires that “a financial services licensee must ensure that its representatives are adequately trained and competent to provide those financial services” that are covered by their licences. Therefore, appropriate training is required for those giving specialist advice in SMSFs.

Policy Statement 146

TheAustralian Securities and Investments Commission’s (ASIC) Policy Statement 146 (PS 146) provides guidance from ASIC on how to comply with the broadly stated requirements of the Corporations Act. There is no explicit requirement in PS 146 for specialists in the field of SMSFs to undertake any training other than that specified for those giving advice in the area of superannuation. In fact, SMSFs are not mentioned in PS 146 at all.

Submissions have been made to ASIC by professional bodies and interested parties concerning the addition of further knowledge areas specifically covering SMSFs, but at the time of writing they had not announced any decisions.

As there is no SMSF knowledge area detailed in PS 146, there obviously cannot be any PS 146 compliant SMSF courses. That is because no course can go on the ASIC register, and thus become compliant, unless it covers a PS 146 knowledge and/or skills area and meets certain pre-specified competencies from the nationally approved training package.

The specific training requirements applying to other areas have not been detailed for self-managed superannuation, which makes it a matter of judgment as to exactly what SMSF training may be required over and above that required for superannuation under PS 146.

ASIC also approve authorised assessors, who are either registered training organisations, universities or industry associations who meet requirements laid out in PS 146.

The role of an authorised assessor is to assess courses, training policies and procedures, and individual advisers against the training standards. PS 146.83 states that training courses in general meet the training standards only if they have been assessed as meeting ASIC’s requirements by an authorised assessor.

NFITAB

The National Finance Industry Training Advisory Board (NFITAB) is the body that advises ASIC on training and competency matters within the financial services industry, as well as administering the ASIC register of courses that comply with PS 146. NFITAB is responsible for the Financial Services Training Package, which list the competencies and qualifications applicable to the industry.

Submissions have also been made to the NFITAB concerning the development of competency standards for SMSFs.

It may decide to do nothing, or that new sets of competencies need to be written, or that only one new ASIC competency will suffice and that other requirements are covered by competencies already in the package.

NFITAB is currently reviewing the whole financial services training package, and SMSF is just one of 19 new financial services areas being looked at for inclusion.

Accountants

Accountants are faced with an additional problem. At the end of the FSRA transition period in March 2004, they will be required to hold an AFS license or to be the authorised representative of a licensee in order to be able to give advice on the appropriateness of a self-managed fund, or to give any advice on issues relating to investments or insurance within the funds. They will still be able to give administrative advice on the setting up and maintenance of a fund without an AFS license.

Accountants taking up licences or becoming representatives will need to be competent in the generic knowledge and specialist super knowledge areas of PS 146 as a minimum. This may mean having to undertake courses and/or submit to assessment in both knowledge and skills. This is in addition to any requirements specifically related to SMSFs that may apply once NFITAB and ASIC have completed their deliberations.

Summary

1. There are currently no specific requirements in PS 146 concerning SMSF training requirements. Consequently, there are no training courses covering SMSF that could be described as being PS 146 compliant.

2. The Corporations Act requires that advisers must be adequately trained and competent in all products and services provided. In the case of SMSF specialists, that may necessitate training over and above that specified in PS 146.

3. There may or may not be an explicit requirement under PS 146 at some time in the future for specific training in SMSF.

4. One or more specific national competencies may be added to the training package to cover SMSF. If this happens, all current SMSF specialist courses, in order to be compliant, will need to demonstrate they meet the new requirements. An authorised assessor will be required to assess courses.

5. Accountants offering advice to customers about whether or not to set up an SMSF, or giving investment or insurance advice to a SMSF, will need to be acting under an AFS licence by March 2004. This leaves just 10 months to complete courses in generic knowledge, super knowledge and skills as a minimum, and perhaps managed investments, securities and derivatives, insurance and self-managed super as well.

John Prowse is managing director ofIntegraTec .