SMSF advisers: Be sure you avoid this new year’s day hangover


A deadline that many SMSF professionals may have lost sight of is fast approaching — 1 January 2019. This is when new educational requirements for SMSF advisers start, and the Financial Adviser Standards and Ethics Authority (FASEA) takes over setting the educational and ethical requirements to be a financial adviser.

Other important dates to key in to your phone’s calendar (with an alert sound) are 1 January 2020, when all financial advisers will need to be signed up to a FASEA accredited code of ethics, and 1 January 2021, when all advisers must have passed an exam set by FASEA.

Are you currently legal, or not?
To be blunt, if you are providing SMSF advice and are not currently licensed or acting as an authorised representative, you are already breaking the law. ASIC has even now started to “shadow shop” unlicensed accountants advertising SMSF advisory services and has started to take prosecution action.

Those SMSF advisers who acted promptly and are licensed or authorised to provide SMSF advice will not need to do anything concrete about their qualifications for now. However for those who thought they would let things settle down and see what ASIC does before determining whether to be licensed or authorised, they are facing a looming deadline. Advisers who have not already started to act may preclude themselves from ever being able to legally provide SMSF advice.

If you want to be brought into the fold, you need to be on the path to doing so. From 1 January 2019, the much-maligned RG 146 requirements cease to be sufficient, and you will need to have a degree-level financial planning qualification (or a related degree-level qualification with additional bridging subjects).

New entrants vs existing advisers
The new requirements will be imposed first on “new entrants” who, simply put, is anyone wishing to provide financial advice, including SMSF advice, who is not currently licensed or authorised to do so as of 1 January 2019. See the expected qualifications here.

The fact that an SMSF adviser has been providing SMSF advice for years under the pre-Future of Financial Advice (FoFA) reforms exemption is irrelevant; it is whether or not you are licensed/authorised before that date. “Existing advisers” are those that on that date are licensed/authorised to do so. See these standards here.

If you are thinking “that’s fine, I have an accounting degree”, you may be surprised that is not sufficient. Most traditional accounting degrees, particularly those pre-dating FoFA, will not have covered the new requirements, and therefore such degrees will not be sufficient on their own. A “new entrant” will need to have completed the necessary bridging courses.

For those advisers who only have a diploma or certificate level qualification, even if you have the RG 146 subjects, this will not be sufficient, and you will need to upgrade to a degree-level qualification with the relevant course subjects.

Hopefully, everyone has heeded the warnings and are now licensed or authorised. The process for these advisers is a lot easier, although this can depend on your current qualifications. But regardless of this, you will have until 2024 to upgrade your qualifications if you want to continue to provide SMSF (and other) financial advice.

FASEA has indicated it is willing to work on the requirements for “existing advisers”, and whether that will include some recognition of existing professional designations is a wait-and-see. However given the desire to align the new requirements to the Australian Qualifications Framework process, it is doubtful that the professional qualifications will provide anything more than potential “recognition of prior learning”.

By 1 January 2021, financial advisers will also have to have passed a common exam as prescribed by FASEA. The exact details of that exam is still to be determined, although a proposed exam framework has been issued. At this stage, it appears that even those with a limited license and which only provide advice in relation to SMSFs will still have to sit and pass the complete exam.

The immediate future
For any SMSF adviser who currently is not licensed or authorised (apart from already technically being in breach of the law), the practical means and timeframe for you to become licensed/authorised is closing. Come 1 January 2019, significantly more stringent education requirements start for any “new entrant”.

If you have a license or authorisation solution, then you can sit tight for the moment, but need to keep abreast of what is happening. The next big hurdle most will face is the proposed exam, which every existing financial adviser will need to have passed by 1 January 2021.

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