TASA and financial planners - the search for facts and common sense
The recent flurry of opinions around making financial planners accountable to the Tax Agent Services Act (TASA) only continues to fuel more flawed arguments that are not substantiated with fact or common sense, writes the FPA’s Dante De Gori.
Taking a pragmatic view on the proposed TASA legislation, there are some basic issues that seem to have been cast aside in favour of relentless attack on the financial planning community.
Let’s take a look at some of the arguments that have been presented in favour of TASA:
Unanswered questions
It has been argued that an accountant who provides financial advice is regulated by two regulators; the Australian Securities and Investments Commission (ASIC) and the Tax Practitioners’ Board (TPB).
Firstly, accountants do not provide financial advice as part of their core services.
In this case, the provision of financial planning advice is an add-on that they have elected to provide at their own will, and with this comes a requirement to comply with the Corporations Act and Australian Financial Services License.
In the case of financial planners, they will have an obligation to additionally comply with TASA, even though financial planners are not choosing to provide any new additional services but rather continue to deliver sound financial advice to their clients.
I would continue to add that the tax advice offered to clients by financial planners is limited to the context of financial planning.
Their role in this capacity is not to prepare and complete tax returns, but to help clients understand the tax implications of making important financial decisions about their future.
Moving onto another reoccurring argument in the TASA debate, there have been repeated claims that the financial planning sector is unregulated.
Looking at the current regulation obligations placed on planners today, this could not be further from the truth.
The reality is that financial planners and the provision of personal advice to a retail client is not only already heavily regulated, it will now incur additional regulatory obligations from 1 July 2013 through the Future of Financial Advice (FOFA) reforms.
Financial planners and licensees are also already required to be licensed and authorised to provide personal advice by ASIC.
Those who are familiar with the complexities of the FOFA reform package – and its obligations around best interest duty, conflicted remuneration and opt-in – would not have presented this argument.
There have been repeated claims that financial planners are not competent or sufficiently trained to deliver tax advice within the context of financial advice.
Training and competency is not an area that is disputed by the financial planning community.
On the flipside, the profession, and certainly the Financial Planning Association (FPA), is talking more and more about raising the bar in terms of training, competency and ethics.
The profession as a whole is trying to shake off negative connotations brought about by rouge planners and sensationalism in the media.
The community of Certified Financial Planner professionals in Australia is growing year on year with more financial planners committing to globally recognised education standards.
If there is a gap in the knowledge held by financial planners, then it is in our interests and in the interests of Australian consumers to fill it – but in the right way and through financial planning regulator ASIC and the RG146 framework.
To consider taxation training and competencies in isolation of the provision of financial advice is missing the point. The consideration of tax matters is an integral part of the financial advice process, and therefore tax training should be also.
What about consumer protection?
I now turn the focus to whether regulating financial planners under the Tax Agent Services Act will indeed improve consumer protection?
To determine this we need to know the answers to the following questions:
- Does the Tax Practitioners’ Board hold sufficient experience and have expertise in dealing with the financial planning industry? Does it sufficiently understand the complexities of the financial planning process? And is it possible for the TPB to understand the impact of tax advice within the context of financial planning and regulate the profession in an effective way?
- What steps are being taken to ensure that the dual regulation model will not manifest in confusion, lack of ownership in regulator responsibilities and create critical gaps in the regulation of financial advice – thus exposing consumers to a gap in protection?
- The very fact that the financial planning profession and the provision of personal advice is going to be subject to compliance with two separate regulators presents questions over balance of power. Which regulator will have the final say, how will this work in practice and more importantly how does this impact on the consumer? What will change in the consumer complaint and dispute resolution process?
Like most cases, the case for TASA is not cut and dried. Nor is it one-sided. But hopefully, with some balanced assessment and a full presentation of the facts, common sense will prevail for the good of consumers and the profession.
Dante De Gori is general manager, policy and conduct at the Financial Planning Association (FPA).
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