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James Barger-Bos, 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 an RG146 face to face course) and, for the first fifty accountants, a share of the net profit.

In the first article of the series James went through a real life example of advice being completed today which would not be appropriate when the accountants’ exemption expires. James then reviewed the impact that the recent APRA changes are having on lending policy and the ever shrinking number of SMSF lenders.

In this article James reviews his experience in obtaining funding for an SMSF using the Bank of Queensland.

Firstly, why the BoQ? I have been asking myself the same question since 28 August when I signed the purchase contract. As a broker, we earn both an upfront and a trail from our lending clients.  I was willing to ignore this benefit and use a lender not on my panel because of an appealing advertised rate.

Mistake 1! They advertised a 3 year fixed rate that included a limited time interest rate discount to 3.99%. Two weeks after the submission I was told that I no longer qualified. OK the rate is still 4.29% which is excellent and I have a finance deadline so I will push on.

Every document that was required on the SMSF checklist had been submitted to the Adelaide branch, to their Head Office and subsequently to a branch in WA. I was then required to submit information as a personal borrower as my wife and I are required to guarantee the transaction personally. We knew this and I wondered why I was never provided the additional checklist upfront. I constantly asked, “is there any other information?”.  I was told “no”.

As an aside for accountants dealing with the accounting exemption, how many SMSF will you establish if the government does ban personal guarantees for SMSF loans? You may answer “some” but, without this security, will there be any lenders willing to pursue this risk? My guess: NO.

So, after 13 business days with the lender, the application was finally submitted to their credit team. This is very taxing on the nerves; when mortgage brokers are used to dealing directly with the credit managers on scenarios sometimes weeks before the submission.

Today is business day 24 and I am still waiting for the final Letter of Offer. I have received one which requested six additional items all of which were provided to the lender but not the credit team and when I asked for these conditions to be removed I was told that wasn’t possible. This is not an unconditional approval, by the way, it’s a document where I agree to pay fees for the next steps to commence.

Of most interest is the loan amount. I am being forced to take out more money which I DO NOT need. BoQ has a peculiar liquidity ratio so the more you borrow the more liquid funds must be in evidence at the time of the submission. I have to pay a split loan fee and an additional monthly fee before I payout the variable portion of the loan that I DO NOT need after settlement is completed.

I would not mind some of this grief if it was communicated in reasonable time, or I was getting paid, or I was at least confident of the outcome. I fear this tale will not have a happy ending..

So, with a combination of ASIC changes (RG146), APRA changes (making loans more expensive and reducing competition) and Government changes (deleting personal guarantees and exposing the lenders to significant risks) one might ask whether it is worthwhile for the suburban accountant to advise in this space after the exemption expires.

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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As finance wise communicates with accounting practices all over the country it is becoming increasingly apparent that there is confusion over what services are currently exempt from the Corporations Regulation, what accountants should demand from their licensee and what the RG146 training requirements are. We can illuminate these issues:

Current Exemptions

Reg 7.1.29 introduced in May 2003 permits

1. Factual advice
2. Taxation advice and traditional accounting services
3. Broad based asset allocation advice
4. Execution only services

The above continues after the exemption. It is important to note that the following advice elements are not available now, which may come as a surprise to many accountants:

1. Type and quantum of contributions
2. Rolling over existing super accounts
3. Investment or insurance
4. Commencing a pension or taking a lump sum benefit
5. Preparing an investment strategy

What should accountants be looking for in a licensee?

James Barger-Bos BAcc BMgmt DFP has his TOP FIVE:

1. Secure web-based software which automates the timing of compliance documents
2. Extending an accountant’s authority to basic banking products and avoiding inevitable breaches
3. Para-planning capacity
4. Diverse CPD options
5. RG146 course

RG146

A licensee ought to have their own RG146 course. Why? Without completing an approved RG146 course it is not possible to obtain a limited license or become authorised. This element of a licensee’s offering demonstrates they have made an extra commitment and they understand what accountants are seeking: namely, a two day face-to-face facilitator lead course where assessments are completed during the course.

UPCOMING RG146 DATES: Adelaide 10-11 November; Sydney 23-24 November; Perth in early December.

OUR SOLUTION TO ACCOUNTANTS EXEMPTION

Finance wise has a clear simple and cost effective solution for accountants seeking to be authorised rather than obtain their own limited license. The licensing fee is $80.00 per week and $50 per month for the software. To understand the full picture please refer to our numerous blogs at www.fwgs.net.au or contact our office directly on (08) 8299 9707.

I have recently been travelling around the country talking to accountants about the various solutions to deal with the accountant exemption expiry and the RG146 training required as a pre-requisite to obtain an authority. We are often asked the question – do I have enough SMSF clients to become authorised?

With the impending accounting exemption expiry I have sympathy for the smaller suburban accountant who have small numbers of SMSFs clients. However the question should not be how many have I got but how many can I get?

It will cost about $6000 pa to become authorised and this cost must be passed on to new clients. I meet some resistance on the topic of fee increases but, don’t forget, every accountant is in the same boat. Well almost.

A firm operating their own license has a much higher annual cost. Their PI alone will arrive at five figures and, as a consequence, they will need to increase their fee by a larger sum than the suburban office.

Finance wise also offers a complimentary ENewsletter which is regularly forwarded by us to an accounting firm’s clients. This ENewsletter covers a wide range of finance topics relevant to small businesses and families.

The following article by Tim Stewart of the Investor Magazine on Monday 12 October should be music to an accountants ears.

The number of Australians willing to switch superannuation providers is continuing to increase, with more than one-third of members willing to ditch their current provider, according to a new survey.

According to the third annual Financial Services Council/ING Direct Your Future Super Survey, 35 per cent of Australians say they would be likely to change their fund provider in the future.

This is up from 27 per cent in 2014’s Direct Your Future Survey, and 19 per cent in 2013.

The top reasons driving the increased likelihood of switching were a desire for lower fees (52 per cent), better performance and returns (52 per cent) and an easier switching process (34 per cent).

A majority (61 per cent) of the 1,236 respondents to the ING/FSC survey estimated they pay under $500 per year in superannuation fees, while 5 per cent said they pay “no fees”.

However, one in five estimated they pay more than $1,000 a year in fees – and this includes both single fund holders (23 per cent) and multiple fund holders (21 per cent).

The survey also found that 68 per cent of Australians selected an employer default fund as their main super fund.

When it comes to engagement with superannuation funds, 89 per cent of respondents said they check their super fund statements.

Around half of respondents claimed to be aware of how much they pay in fees (51 per cent) and 64 per cent of those surveyed claimed to know the balance of their fund.

Sixty-eight per cent of respondents said the performance of their super fund was “good” over the past 12 months.

Eighty-eight per cent of those surveyed said they supported the current super system, and 80 per cent supported an increase in the super guarantee to 12 per cent over the next decade.

So this should encourage firms with very low numbers of SMSF client to seek an authority to provide advice after the accounting exemption expires on July 1^st, 2016.

A final note of caution: if the license solution you are seeking does not have web based software to automate the process then small firms would be advised to find another solution.