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accounting exemption

LRBA Loans Dying a Quick Death (Part 1 of 3)

James Barger-Bos, the CEO of Finance Wise Global Securities Pty Ltd, has over 27 years of financial services experience. Fwgs is offering accountants a simple, clear and cost-effective solution to the accounting exemption. By becoming authorised representatives they will have an intuitive web based software solution, a complete range of training options (including face-to-face RG146 face to face course) and for the first fifty accountants a share of the net profit.

In his first article he deals with RG205.

James has advised on numerous transactions but has not been involved in providing Credit Advice since the APRA changes. These changes are having a profound impact on the lending landscape. As an aside he established his own SMSF several years ago for the purpose of buying an office.

When we chat to the average suburban accountant seeking advice on the exemption expiry and licensing solutions, we ask them what their typical SMSF client looks like. Many accountants respond that the typical clients are Gen Xers seeking to buy residential property.

After the exemption expires on July 1st 2016 many expect this to continue.

A case fwgs recently provided advice on represented a typical scenario; a single professional is rolling her fund of $135,000 into an SMSF and purchasing a residential property. Allowing for $5,000.00 in set up costs we have the following borrowing requirements.

Purchase Price:                 $340,000

Purchase Costs                  $18,000

Total                                    $358,000

Loan 70%                           $238,000

Deposit                               $120,000

Surplus                               $10,000

Even if there are no surprises ie significant repair of air conditioners, ovens, faulty electricals or plumbing and there is a tenant immediately available would this scenario be acceptable? As a hint, James isn’t sure how insurance could be paid for either.

However, once the exemption expires this scenario will not be acceptable to licensees. RG205 is very clear on advisors recommending that funds be established when the rollover balance is under $200,000. It needs to be justified.

On what basis could this scenario be justified? If the Gen Xer was self-employed and intended to make a concessional contribution of $30,000 within the next month and then another on July most licensees would accept this. Most. The wording needs to be clear in the recommendation section of the Statement of Advice.

If you would like to discuss how the constantly changing banking environment would affect your capacity to provide advice once the exemption expires then please feel free to ask us by emailing [email protected]

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SMSF Accountants Exemption

ASIC warns of ‘significant risk’ with licensing (RG146)

As the time moves inexorably to the accounting exemption deadline finance wise is expecting to be rather busy in early 2016. James Barger-Bos, the CEO of finance wise global securities, remains optimistic but does have some concerns. Finance wise offer a unique web based software solution for accountants to enable them to manage the new advice environment with little impact on their current businesses.

“We have developed a two day face to face RG146 course for accountants and we bring the training to a suburb where there are a cluster of firms interested. Every firm should be interested but the common complaint is that they don’t have enough time to manage their own practice let alone take on additional training and manage the ASIC responsibilities.”

This is reflected in the following article sourced from SMSF Adviser (September 17th) written by Katarina Taurian.

At the end of August, ASIC had received only 161 applications for the limited licence.

“This number is very low if you consider the number of accountants who are likely to rely on the exemption,” said ASIC senior manager Trevor Clarke at the Chartered Accountants Australia and New Zealand National SMSF Conference on the Gold Coast earlier this week.

Of that 161, 70 have been approved, seven are currently under assessment and 82 have been withdrawn by the applicant because they had supplied insufficient information.

One applicant converted from a limited to a full licence, and “interestingly”, one application had an offer withdrawn after information surfaced that was not originally disclosed to ASIC, Mr Clarke said.

Some of the common issues that ASIC has seen in applications include insufficient evidence of training course completion, failure to include critical mandatory financial information, and failure to provide evidence of adequate professional indemnity insurance, Mr Clarke said.

“If issues can be rectified easily, we will give the applicant the chance to do so. However, if it can’t, we will give the applicant the option of withdrawing the application so they can attend to the issue,” he said.

Mr Clarke also expressed concern about those accountants who have yet to lodge their limited licence applications.

“Those who delay lodging their application until soon before June 2016 may very well find themselves unable to advise on SMSFs for a period of time until we finalise the assessment of the application,” Mr Clarke said.

“If we receive an influx of applications, depending on the numbers, processing the applications may take several months.

“We encouraged accountants applying to do so by 1 March 2016. This date is not mandatory, but if you lodge it past this date, you are facing significant risk that the application will not be assessed before 30 June [2016],” he said.

To register for the accountants RG146 course and enquire about licensing send an email to [email protected] or register online.

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FOS’ top 10 tips for accountants giving financial advice (Part 3 of 3)

This is the third article outlining the Top 10 tips for accountants giving advice after the accounting exemption expires 30 June 2016.

7. Use risk profiling tools carefully

Make sure that the strategy and asset allocation you recommend to a client is consistent with risk profile generated by the risk profiling tool you use. If there are inconsistencies, you must clearly explain them.

Remember, risk profiling tools are only tools. They all have inherent flaws that must be recognised and addressed by the adviser.

Fwgs – our risk profile assessment is included in our software and automatically tallies the outcome which is included in the client’s Needs Analysis.

8. Don’t give cookie cutter advice

This is really a reiteration of tips 6 and 7.

You should not put all or most of your clients into the same strategy and products, especially not gearing strategies. For example, we saw a Statement of Advice for a client with taxable income of $42,000 that stated: ‘Your reasonable level of surplus income and high tax rate should make gearing an appropriate option for you’.

The best interest’s duty requires that advice be reasonably likely to achieve the client’s goals and that alternatives have been considered.

9. Understand and explain the products

Understand any products you are recommending. Don’t advise on products you don’t understand.

Don’t just hand over a Product Disclosure Statement (PDS) – you must explain the

PDS to your client and record your discussion in the Statement of Advice (SOA).

Don’t cut and paste PDS disclosures into your SOAs. Show you understand the products by using the same words you use to verbally explain the products to your clients!

10. Be clear about the advice relationship with clients you know

If you are giving advice to a friend, relative, colleague or employee, it is critical to formalise and document the process as you would for any other client.

In addition; declare any conflicts of interest as you would for any other client.

Finance Wise Global Securities Pty Ltd has a unique solution for accountants requiring an authority to advise on SMSF’s once the accounting exemption expires please email the team at [email protected] to find out more.

Alison Maynard, ombudsman, investments and advice, Financial Ombudsman Service Australia

Source: SMSF Adviser Sept 9, 2016.

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