June 24, 2021

SMSF Series #2 – Tracey Scotchbrook – Transcript

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SMSF Series

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SUMMARY KEYWORDS

smsf, trustees, cost, advisors, work, fund, asik, people, association, clients, conversations, professionals, accountants, bit, financial advisor, assets, important, individual, product, corporate trustee

SPEAKERS

Tracey Scotchbrook, Emily Blanch, Fraser Jack

 

Fraser Jack 

Welcome to the x y advisor podcast, a global community of financial advisors sharing and learning with one another to drive the positive evolution of financial advice. To get involved go to X Y advisor.com or simply download the x y advisor this series is brought to you by super galleon, a specialists self managed super fund administrator, known for their client centric approach to their full service solution. If you need SMSF support or CPD check out the Knowledge Center or sign up for Super Guardian updates at Super guardian.com.au Welcome back to The xo advisor podcast. I’m Fraser Jack and today we are exploring all things self managed super funds, and I’m joined by Tracy scotch Brooker from the self managed super fund Association. Welcome, Tracy. Hi, Fraser. How are you? I’m Fantastic. Thank you. Thank you for hanging out with us today and chatting about all things self managed super funds.

 

Tracey Scotchbrook 

Yeah, my pleasure.

 

Fraser Jack 

Give us we might start with a quick overview of you and just your position in the self managed super fund Association.

 

Tracey Scotchbrook 

Yeah, so I’ve been quite fortunate to work in the SMSF sector for quite a long time. And I won’t put a number on it because it gives a little bit too much away. But I was quite fortunate I started as a tax accountant originally and had that original sort of businesses is that broad based tax and accounting experience. That also included some exposure to self managed so fun, I just there was just a natural gravitation to I found it really interesting. Because it was just so different to the other typical tax and accounting work and wall through Good luck, then design my career to be on a pathway where the opportunities seem to expand on this on a super fun front. Till it came to a point where I was really at a crossroads and need to make the decision did I wish to continue as a business service accountant or move into the self managed Superfund space. Unfortunately, it’s when I first encountered some members of the soft mostly fund association or spa as was known a way back then, who were some fantastic mentors for me and got me on the pathway to specialization and the park put me on the pathway to my careers take me to that to today. And I’ve been a bit of a hybrid of an accountant and a financial advisor since about 2010. There’s a lot of talk back then around the removal of accounts exemption and the shift in licensing. And so I took the opportunity to dive into this vast base because it just provided so many more opportunities for to have those strategic conversations with clients. So I’ve kind of straddled the two worlds for as an accountant and an advisor and never really sure what to call myself other than an SMSF specialist and had a great relationship with the association. And I’ve been fortunate enough to join the team in April this year, as they as the Policy Manager. So which has been a really exciting opportunity quite quite different to public practice, but you’re really loving it by able to sink my teeth into some of those meaty consultation papers and thing that’s been quite a busy, busy time since coming on board.

 

Fraser Jack 

I just I just love the fact that you you no doubt about the the idea of getting your teeth sunk into a policy paper, which is an incredibly No, I’ll just touch on this conversation to around the idea of, you know, advisors and accountants both being in the space, there is a bit of an overlap in some ways there’s they can be they can be confusion as to who’s doing what at some, at some points, they can be a double up, they can be conversations from, you know, all sides of conversation around, you know, TBD, tpB membership tax accounting is as a text job. Is that an advisors job? How do you see all that sort of settling? I mean, obviously, there’s sort of, I feel like it’s a bit of a mindset, too, sometimes there’s a there was a bit of an there can always be a conflict there.

 

Tracey Scotchbrook 

Yeah, I agree that that whole mindset concept. The approach I’ve always taken has been around collaboration and collaboration. smite was a core part of my practice when I was was in practice prior to join the association. And those relationships, I think across the professions are essential, particularly nuclear issues around for example, access to information from the tax agents portal. So total super balances for for members, what’s their transfer balance cap? What are their contribution caps have they got bring forward, concessional contribution cap amounts, how much is it, that level of reporting is really vital for the advisors for the advice that they’re giving, but that don’t have ready access to Whereas the Texas Tech’s accountant dots through the text agent portal, so that’s where that relationship is really important, as well as on an execution level as well. So to make sure there’s no doubling up, I’ve seen scenarios where things have gone astray where that communication headpiece hasn’t worked so well. And there’s been advice around contributions on one side and advice on the other, and then there’s ended up being a double and the poor client in the middle is really not really understood that there was an issue there. So it collaboration is such an important important piece, I think, in this space, for sure.

 

Fraser Jack 

Yeah, I couldn’t agree more. And I think all of the professionals working in the space need to understand that very, very concept. And they have to go Well, yes, this is my client. But it’s, it’s the client of these other people as well as other professionals. And we all need to work together. If we’re not working together in a harmonious way, then we shouldn’t be doing

 

Tracey Scotchbrook 

Yeah, exactly. Because another example of that, where the tax accountants really play important roles can be around the tax planning. And what happens where you’ve got clients in pension mode, and perhaps is a mixture of accumulation, different scenarios playing out. For the advisor wanting to do particular pension strategies or selling of assets, it’s important that there’s a good co work that goes on to make sure that there’s not any unexpected adverse outcomes. Sometimes strategies look good on paper, when it comes to execution, what it’s going to cost versus that to execute versus the benefit doesn’t always work out. So that’s another situation where I say that that that whole collaboration paces is really, really important to get that right outcome ultimately for that that shared client. Yeah, that’s

 

Fraser Jack 

absolutely right. It’s a really interesting space to in a mind again, it’s a mindset that you have to come into. So absolutely, yeah. Fantastic. Now, tell us about the association. It’s obviously you’ve been, you know, fairly strong for a long time. And you know, it does a lot of work. And I think, yes, as Policy Manager, you do a lot of work in the advocacy space. Correct? Yeah. So

 

Tracey Scotchbrook 

the association was originally born out of a need, because smss were under threat at the time, and a core group of people came together to form the association to advocate and effectively saved save the sector. And so it was born on a very strong platform of advocacy and policy. And certainly as CEO john Maroney and Deputy CEO, and head of technical education, Peter Burgess do a lot of work in speaking with the key people in Canberra, whether it’s trade, Treasury ministers, so those those relationships and conversations are really very, very important to the work that we do. And for myself, it’s it’s it’s consulting with members and putting together those responses to to the various bills and consultation papers that come from a variety of sources, whether it’s through Treasury a to as a prime minister, and cabinet, there’s quite a variety of sources or where this consultation process actually actually occurs. So that’s really quite, quite interesting, but it’s always had a strong a strong platform. And the other thing I think that’s important is that the fact that the SMSF sociation actually represents a broad base of members. So we’ve got key professionals from different groups. So whether it’s accountants, auditors, financial advisors, actuaries, lawyers, hopefully haven’t missed anybody there. But it’s, it’s anybody who is a professional working in that space. You know, it comes back to what we’re talking about before about collaboration. I think Esma says very much about collaboration, because all of these professions are need needed at various different times and need need to work together. So it’s really interesting from that perspective, when you’ve got such a melting pot of different professionals and representing their interests.

 

Fraser Jack 

It’s really interesting. When you think about that specialization, conversation on Obviously, we’ve had specialization conversations, you can specialize in a dealer type of client or a particular product or a particular, you know, demographic, all those types of things. I guess, you’re it’s very clear that self managed Superfund is what you’re specializing in for all the people that work in and around that space.

 

Tracey Scotchbrook 

Correct. Correct. Now, importantly, consider considering the trust days in that mix as well.

 

Fraser Jack 

Yeah, that’s a really important point. The the trustees have to be represented. How do you describe this openness with funders? Is this a strategy or a product or where are we sitting in this space?

 

Tracey Scotchbrook 

Yeah, that’s, that’s a good question. And I think it’s all of I think it’s all of those things. I think it’s a product because of the nature of it. And whilst it’s viewed as a structure, I think there’s So many moving parts and components to it, they might get a product. So when you start talking about contributions, and then underlying investments, pensions themselves being a separate product, so yes, it’s a structure, it’s that said the wrapper, but inherently all the moving parts sort of falling into that sort of product side of it. Certainly a lot of strategic advice involve also a lot of product advice. So I got the need for that for the broad range of professionals.

 

Fraser Jack 

Yeah. Okay. So we’re sort of putting it in the into the the three buckets strategy, the product and the, or the strategy product in the in the structure. Okay. Very good. Tell me about the association. So your role is to really work with these in the policy space, working with government working with other associations, I guess, and all the stakeholders?

 

Tracey Scotchbrook 

Yes, absolutely. There’s a lot of active engagement that goes on on an ongoing basis with the various professional body so FPA chartered accountants, IPA, CPA, lots of ongoing conversations, which, which is fantastic. They’re great working relationships. And where possible, that means that where with is alignment, we can actually issue statements or consult jointly, which helps to deliver better outcomes. Yep.

 

Fraser Jack 

So that a lot of that conversation takes place, obviously, before, you know, before you make a statement.

 

Tracey Scotchbrook 

Oh, yes. And and the association has been involved with a number of joint joint statements, either published to the media, or whether it’s joint letters to whether it’s to it to a minister or, you know, a to that year. So there’s a good, good working history there amongst the professional bodies, which is great.

 

Fraser Jack 

Yeah, fantastic. And obviously, a big part of what you’re doing is the idea of a specialization or, you know, being able to say that these members are specializing in segments of a fund.

 

Tracey Scotchbrook 

Yeah, correct. And it is a complex area. And some people may be aware of this myself and understand some of the fundamentals. But when it comes to some of those moving parts in the strategy, I think that’s where the specialization is key. The there’s so many compliance rules that need to be navigated. And from a strategic point of view, there’s so many different options. So it’s looking at what’s going to be the best option for for the client. And I think that’s where the specializations really, really add value. And then so important. Yep.

 

Fraser Jack 

They mentioned trustees. And this is intriguing, because I hadn’t really thought about this, but um, is that something that you co trustee be a member of the association,

 

Tracey Scotchbrook 

so not as a member, but they do you have a website called SMSF. Kinect, which is directly targeted at a trusted audience. So it’s somewhere that trustees can go to seek out information, access articles, and various other tools, checklists, little videos is quite, it’s quite a good resource. And it’s one that advisors can use as well, if they’re looking to find an education source or an information source for clients, they can access the information for free, they just need to create a login. And then they’ve got free access to the resources that are available there. That’s really the position I think the association has taken is that rather than a member, it’s about making sure that we’re providing information out to that trustee market as a source of truth, I suppose. And because there’s a lot of misinformation, as we know that that happens out there. And on social media and various other locations, at least, this is a central hub that they can come to, and access various pieces of information. There’s even little mini courses. So for those that are really wanting to get in and sink their teeth in as trustees and learn a bit more, or those that are thinking about self managed, they can sink their teeth into these little mini courses as well, which are really great. Yeah, really engaging.

 

Fraser Jack 

Fantastic. And we’ll just grab that the URL for that again, what was that when

 

Tracey Scotchbrook 

it’s SMSF? connect.com.

 

Fraser Jack 

Fantastic. Brilliant. Now let’s, let’s have a chat about some of the words you and I spoke before about some of the costs and the research around around this. And obviously, there’s been some different sort of papers put out, obviously, in 2013, Essex sort of came out whether mentioned around costs of running a self managed Superfund and how much money should be somebody should have to start making it affordable in the in bunnies, I guess you could say. And of course, that’s no longer around anymore that Peter put that paper

 

Tracey Scotchbrook 

yet. So right when I did some research with ESET, back in 2013. And that’s when we started say that sort of rule of thumb that benchmark around that $200,000 mark for when mssp can cost cost effective compared to having an app profaned and then 2019 as issued a effect sheet, which was essentially I was going to cost three and a half $1,000 to run an SMSF. They’re not economical below 500,000. And it caused quite a bit of controversy at the time. Funnily enough, I know some advisors out there that actually was the content of the fact shape was controversial, controversial. They actually saw this as an opportunity because their clients were looking at going, Wow, I submissive doesn’t cost us anywhere near that amount. That’s and we don’t have 500,000. So it actually was it was perceived negatively. It also provided for some interesting conversations. And I think it did spark some good conversations around Well, what does an estimate of actually cost? And I think the key takeaway, I think, from from all the, all the all of this discussion around essick fact sheet, and then the research that has flowed later from Ross Warner, that they did in association with the SMSF Association, is that if you’ve got to look at what the costs are, and I guess the the value prop for an SMSF is that is their uniqueness in the fact that my SMSF is going to be completely different to your SMSF. And what you’re doing with it what and why it’s that no two Superfund generally are going to be exactly the same. So they’re, they’re quite a different product position compared to other SMSF. So I think it sparked some really good conversations around what does it cost? But what’s it going to cost me with? What am I I plan to do? And is it appropriate for me, of course, cost design a just one part of the the conversation on whether an SMSF is appropriate. And there’s certainly a number of other reasons that people do look to an SMSF. And where the cost may not necessarily be the overriding decision point. For example, specialist estate planning, where you’ve, you’ve you’ve got a little bit more flex, in control, control the things that you can do, versus one of the large aperture funds. So I’ve seen a number of scenarios where that’s been necessary. And people have been able to forward plan that they’ve had time, because I’ve had long, perhaps degenerative illness, I’ve been able to put things in place, and then put plans in place to make sure that their children are looked after, and it just provided greater flexibility than than what they could have achieved. elsewhere. So you’ve got to weigh that up, I guess, with with what’s happening in that client’s specific circumstance. What was really interesting with the rice Warner research, light light that came out like last year, is it showed that that that 200,000 sweet spot is still there. So certainly, you are in going to be in front cost wise, broadly speaking from that, $200,000 Mark, and above. What was interesting, though, is with the improvements in technology, and and some of the the time and pricing efficiencies in lead to cost efficiencies, we now say around about that $150,000. Mark, we are about looking at some cost parity between the SMSF and the performance. So we’re starting to see it come down in terms of the the cost dynamics, and technology has had a huge part to play in it.

 

Fraser Jack 

Yeah, well, we’re getting some technology in a second. So this, this cost, as you know, these cost figures is interesting that 13,500, where that sort of came from, I guess that sort of thing, taking into a lot of the the, you know, the specialist estate planning setups, the the, you know, that all the different professionals involved around the the outskirts of of this setting up and those sorts of things. Is that is that is it was that way over budgeted or is it? Was it?

 

Tracey Scotchbrook 

Yeah, yes, I think what it was is the data from the A to was perhaps used in an incorrect, incorrect manner. So we saw things like establishment costs and things like that, wrapped into that annual annual cost. And I think that’s where it sort of fell over a little bit. It’s just that it’s the data that it came from was fine, but how I got kind of packaged together just didn’t didn’t quite work. So the establishment costs, of course, are you know, sunk upfront cost. I always have likened it to, you know, thinking it rather as an initial upfront cost. What if we amortize it over the life of the fund? How long are you planning to have that fund for? So typically that 10 years 2030 depending on how old someone is, of course when they start the fund, but they’re expected to be around for time. So those setup costs whilst Yes, they’re they’re there, and they’re a sunk cost. Really, when you look at that over the life of the fund, it’s that they’re quite low.

 

Fraser Jack 

And we really should be talking about the life of the fund should we not just the setting up as in the life of the fund the the winding up cost as well as the setup costs. And obviously, that sort of has a barbell effect chain, right, a lot of the beginning of the beginning of the end and listen, the middle.

 

Tracey Scotchbrook 

Yeah, and look, the wind up causes is a really great point that you make there. And, and I think more and more advisors need to be incorporating conversations with those around wind up with those initial conversations that they’re having with clients before they embark on an SMSF. Just to make them aware, because often people don’t realize the work and paths and costs that might go into the winding up of the fund. And depending on how the fund is invested, there may be some transactional costs. So particularly, you’ve got property, time and cost to realize that to then be able to roll your funds over. A lot of Trustees don’t understand that process. I’ve never had self managed to transfer costs, they’re not going to, but they just think I will, if I decided I don’t want this in walk and just pick this up and move it over there. But it’s not quite that simple a process. And I found where it’s not really been appropriate. In essence, it’s not really been appropriate for clients, when you start introducing, just as I guess, is the the psychology of working with clients. When you start talking about well be aware, if this isn’t for you, we decide to wind up, this is what you’re going to have to go to and this is what the cost is going to be suddenly the realization hits home that I can this is probably a little bit too complex and not really effective. For me, and it’s a nice, easy way to kind of manage that conversation pace. But I think it’s critical to have that awareness upfront so that people really genuinely understand what they’re getting into. Because it’s not the sort of thing to set out, run for, you know, a couple of years and then wind up move on, like there will be some cost luggage, you know, internet prices, it’s got to be a long term, longer term strategy.

 

Fraser Jack 

Yep. So definitely not a short term strategy. But I do do I guess it’s probably interesting to consider some of the stats around this as well to say, Well, you know, most people would a lot of people would, you know, start up and finish it off and in a short amount of time, but then a lot of people would continue on for a longer period of time. And this is understanding the client’s situation to say like what, you know, this is going to be a 15 year or 20 year or 17 year or five year, whatever it might be. Plan.

 

Tracey Scotchbrook 

Yeah, exactly. And interesting enough about I think it’s 45% of the current population of estimate saves. I have been around for 10 years or more.

 

Fraser Jack 

Yeah. So that yeah, it’s interesting to obviously bring those stats into the conversation when when setting one up, absolutely, let’s get let’s get into some of the technology because I love technology, but also the fact that you know, it is bringing the cost to administer down. Obviously, some of the it may not be in this initial setup or cost of the professionals but certainly in the administration of an ongoing tell us about how sort of data feeds and even machine learning has changed. You know, what we’re doing over time?

 

Tracey Scotchbrook 

Yeah, so we’ve seen a real revolution in the the administration software that is available for accountants and administrators. We’ve had bank data feeds available for a while now. But with the new generation of administration products, and the way they started feeds flow into it. And, and and pardon, I’m not not unfair from an IT expert. So I can’t sort of go into the the nitty gritty for the technophiles out there. But certainly, they’re far more efficient, the way that they feed into this new generation of, of software. And there’s greater access to other information from various platform providers, as well. So in terms of getting the Manage portfolios, the share trading accounts, having those contracts actually feed into the software system as well. And so what we have now in these systems is the ability to read transactions and to rage share trading contract notes that that come through, they can actually read and interpret that information. So whether it’s a narrative for a transaction on a bank account, or the key pieces of information in that contract, and it can read, interpret, and then process and allocate those particular transaction. So that was there’s quite a bit of automation that starts to come into play. And with that there is machine learning that that’s coming into the systems as well which is adding to greater efficiency. So they’re learning that our if you’ve got a regular contribution that’s coming from a particular port employer that belongs to this particular member, it’s able to this Recognize automatically that this is relating to that particular individual. So it this is really created quite a lot of efficiency around the administration. It’s minimizing the manual transaction processing that that used to happen quite a bit. Poor old accountants beginning of fall, at the end of the year with all the bank statements, all the contract nights, hempton manually prices, all of these into the system was this happens automatically. It’s happening on a sort of almost live basis as well, which is just brilliant, I think, particularly for advisors who are needing access to information in a more real time basis, rather than 1218 months after, after the fact. So the fact that this information does come through on a daily basis typically pushes through overnight, when it’s not, not fully live, but it’s it’s getting pretty close. So that’s, that’s really powerful as that information is so, so important. And can also drive there the advice process, it also provides for strategic opportunities, because you can see what’s happening and what’s coming through the system, what clients are doing. And perhaps head off at the past. If somebody looks like they’re they’re going to be heading to say Xs contribution territory. So it allows for a lot more proactive engagement with clients as well, which is fantastic. Yeah, certainly

 

Fraser Jack 

  1. It sounds really exciting. I know, you’re absolutely right, the proactiveness of that, of getting in front of anything that’s likely to cause a problem is amazing. How do you see this developing over time? Because I’m imagining there’s a lot of assets out there that trustees might be getting involved in? Well, let’s talk about, you know, blockchain style products or whatever it might be, you know, online, and obviously, those transactions are pretty important as well to try and get those in accurately.

 

Tracey Scotchbrook 

Yeah, absolutely. Look can’t provide any insights on to blockchain. That’s sort of not my not my foray. But you’re right. It’s sad. This, I think it’s the tip of the iceberg. And Bitcoin doesn’t all those different crypto products don’t seem to be going away anytime soon. And I think everyday, pick up the paper, there seems to be an article about something that’s happening in that space. So clearly, there will be something that will emerge, you would think, in that space going forward, how that fits in with the access keys and the security protocols. And that’ll be an interesting one. But clearly, that will be I think, the next the next step, the next challenge for the software providers, so we’re always looking for that that cutting edge advantage.

 

Fraser Jack 

Yeah, fantastic. And I think obviously, the systems even from the the taxation system, you know, the the the portals that are available, all those sorts of things will start beginning, you know, one touch up loads and all sorts of things so that they can know where they’re up to. And you can get sort of real, not just data feeds from the product providers, and then in the numbers, but both ways as in coming from the the portals.

 

Tracey Scotchbrook 

Yeah, exactly. that that would be, that would be fantastic. And that would make life a whole lot easier. I think for a lot of people. Yes.

 

Fraser Jack 

Very good. And yes, I guess we’re that’s an interesting space to watch and see how that goes. And obviously, that age, you mentioned is driving that the ongoing costs of the administration costs down. Absolutely. Now, tell us about the tell us about corporate trustees. I mean, this is a this is a subject that when we’re talking about cost, and often there’s a mindset that a corporate trustee is additional cost. Meaning you’ve got some different ideas and opinions on that.

 

Tracey Scotchbrook 

Here. Corporate Trustees, I think, are essential for for a number of reasons. And certainly sometimes people are concerned because it is an additional cost, asked, Is it necessary, and always like to position it is it’s a kind of an insurance policy. And that’s for a number of reasons. Firstly, if there’s ever a need to change trustees, when you’ve got a corporate trustee, that always happens at the director level. So when we have individual trustees, if you’re wanting to add or remove someone as a member of the fund, they also need to come in or out as a trustee of that fund. So that as a part of that process, the lawyer would need to do a date of amendment to reflect that change in trustee. But also what that means cost has been a change in trustee, it’ll impact the bank accounts. And often it’s not just a case of changing the title, it will often require new bank accounts, new chairs, trading accounts, this property, updating the titles on property and so forth. So you know, it can be done, but it’s a bit of bit of work to do and sometimes a little bit of cost involved and time as well. Now, if you think of it in the context of someone, we’ve got a family member who’s seriously ill perhaps his loss of capacity And they are unable to act as a trustee of the fund. So an enduring power of attorney is stepping in to be the trustee of the fund on their behalf. As an individual trustees structure, the last thing you want to be worrying about is all this extra admin and cost, you want to be focused on the family members. So from an administration point of view, it’s a case of working through what the date and the corporate trustee rules require in terms of appointing that person as the trustee or the director of the trustee company, and removing that other person so that that so that they can act. So that can be a lot of peace of mind. But as I mentioned, to it’s the cost of changing everything. So anytime that you’ve got any changes, there will be some administration costs that are involved with it. So I think to do that upfront, it just absolutely makes sense. It also makes sure that your SMSF assets are protected. So under the superannuation law, that you have an obligation as a trustee to keep your assets, the soup sorry, the Superfund assets separate from your own. So if you’ve got your own name appearing on the title of assets, you need to make sure that they’re properly separate from your personal assets. And that can be challenging. Sometimes particularly, we look at land titles. So I’m NWA here on the land titles, it only shows the trustees knives. So it’ll only have the individual names. So if you have a special purpose corporate trustee, that company name will appear on there. And it’s clear that it is a Superfund asset. So the last thing you want to be doing is trying to defend Superfund assets, if there’s ever any disputes or litigation or anything like that out happening, which we think will never happen to us. But unfortunately, when it does happen, it can be clean, can become quite messy and complicated. The other thing too, is that if the company is registered as a special purpose SMSF trustee company, the the asik annual return phase are significantly lower to a normal propriety limited companies and the $55 a year, but what a lot of people don’t realize is you can actually do an election and pay up to 10 years upfront, and in doing so you get a discount. So you pay less than just under seven years worth of fees based on the current rate. So you’re insulating yourself against fee increases, and you get a discount for paying it upfront. And plus, it’s just one less thing to worry about. So it’s one way of saving money over the life of the fund as well. A lot of people don’t don’t know about

 

Fraser Jack 

Oh, fair enough. There you go. I didn’t I didn’t know about that either. So there you go. You can pre pay your esic fees and save a few dollars.

 

Tracey Scotchbrook 

Yeah. So there’s a special purpose for best ways just to to Google it. And that will take you to the right place on the ethic web page. And this is the form that then you need to fill in send in the payment. And that’s it.

 

Fraser Jack 

Yeah, very good. Now also, there’s a bit of an advantage to when it comes to if the if you do actually suffer any fines for the trustees?

 

Tracey Scotchbrook 

Yeah, absolutely. So the ATR has powers to issue administrative penalties against trustees. And these are levied per trustee. So if if they make a finding that there’s been a breach, each of the trustees will be penalized. So if you’ve got two individual trustees, that’s two times a penalty one each, if you’ve got four individual trustees, that’s four times because each of those four individuals will be levied a penalty. In the case of a company, whilst you could have more than one director, the trustees actually the company, so there’s only one penalty to fly through. And look, people of course, are wanting to avoid penalties, because all want to do the right thing. But sometimes things can go wrong when you least expect it. So at least that’s one way of minimizing some future feature costs. should something go wrong.

 

Fraser Jack 

Yeah, exactly. It’s not something where you want to be aiming for but it’s something to keep in mind. Lately, the correct good Now tell us tell us about the future. You’re doing a lot of work with the association, obviously in the process of setting up a single disciplinary body. How’s that going?

 

Tracey Scotchbrook 

Yeah, so there was a consultation paper that was a bill draft bill that was put out for for comment, and the association has put its submission in so the single disagree body is looking to make esic that that that single place for regulation for financial advisors. So it will be the disciplinary body so they’re looking to expand the role of the financial services credit panel, so that fsap and that will hear disciplinary matters and be able to issue sanctions, written warnings right through to the broader end of the spectrum. It also means that esic will have a broader range of powers around penalty, so probably the best comparison that I’ve heard, which I thought was great, so I’m gonna I’m gonna steal it. Is the comparison to the trustee penalty regime that was introduced with the AGI that provided the AGI broader powers to each of those administrative penalties we were just talking about a moment ago, because prior to that the only option they had was to make a fund non compliance that was going through that court process and that non compliance, so you’re talking the very extreme end of when things go wrong. But there was nothing that sat in the middle to be able to educate reorientate. And to, I guess, rectify things before we get to that really extreme end of the of the penalty spectrum. And this is really what the new ASIC powers are about. It’s adding that broader suite of powers rather than going straight to, to banning orders. other components of the bill will be of course, well talked about winding up of for sale. So the administrative functions are for sale, we’ll be moving into asset and then those legislative framework, powers will go to the Minister. So going forward from one January 2022. If the bill is passed, we’ll say asik, administering the exam, and all of those types of functions. So the good news is they’ve made provisions in there for the education that has already been accredited, including the foreign education that they’ve they’ve approved for people with their relevant degrees, that will roll and fall into two assets. So which absolutely makes sense. And then we’ve got the move to annual advisor registrations. Really interesting how it was position is that I positioned it that they are the IFA cells would be responsible for registering the individuals, but the individual would have to make a fit and proper person declaration as a part of the process. And it just seemed like a lot of additional admin. And one thing that we advocated for in our response to the bill was that, look, this really should be an individual obligation, let’s cut out the middleman and just have it just between the advisor and esic. And I think that brings it in line with other professions, as well, when you look at lawyers, accountants, and so on their individual registration process. And then the last piece of the puzzle is around the tax practitioners board, the tax financial advisor registration, so it’ll move from TPB into asik. Now, no, this has caused some people concerns where they’ve recently done their renewals, they’ve paid their fees worried about are not going to get reimbursed, what will happen is your registration period will continue. It’ll just transfer from TPP to asik. And when your renewal falls due as it ordinarily, would, you then renew with asik within the the new system going forward. One area of concern we did raise was around those advisors who have qualified for tax financial advisor registration under the years of experience and holding a relevant professional body registration to make sure that they are properly catered for under transitional measures. Everyone, of course, will have to make the education standards standards by one January 2026. But people are still completing their education need that time to do so. So we’ve just highlighted that there’s a need to make sure that there’s good clear transitional measures to make sure those people can still do the work, essential work that they that they are doing. So there was quite a big body of work. And it’ll be interesting to see the response when the final bill is ultimately released.

 

Fraser Jack 

Yet it is it’s been a moving piece for a piece of the puzzle for a long time. It’s been difficult but when I think about Percy are in the tax practitioner board, they generally spoke about the individual advisor being as an individual as a human being. And the company the corporate end, obviously, when you register with the tax practitioner board, you register your corporate and you also register you as a human. This now forming under asik seems a bit funny to me because esseker obviously corporate charter they regulate corporations and obviously it’s on the Corporations Act we’re talking about how are they going to be able to regulate or you know, individuals?

 

Tracey Scotchbrook 

Yep, so there’s provisions that have been made so they they removing the tax financial advisor components from the the Tosca legislation and moving that into to the Corporations Act and then as it will have expanded powers under the the ASIC legislation. So one thing that that has been talked about is making sure that there’s proper representation from tax professionals within that fsap. So that disciplinary panel to make sure that when they’re looking at disciplinary matters involving taxation, that there’s an appropriate professional that’s involved in that within that panel. Very good. Thank

 

Fraser Jack 

you. Well, they you know, so much obviously, it’s a moving Pieces again. So, so much to see to see how well that that turns out to Tracy, thanks for coming on and chatting us today. Tell us about how somebody can get hold of you or have conversations with the association moving forward.

 

Tracey Scotchbrook 

Yeah, so certainly feel free to contact contact us through our submissions at SMSF association.com. If you’ve got any feedback on anything that’s are open for consultation, or indeed you have any concerns about something that’s happening out there that we need to be aware of from an advocacy point of view, that’s probably the best, best port of call is always go to the SMSF Association website. I’ll certainly ring through the ring through to the the head office in in Adelaide, you can track me down that way. But always, always love hearing from people on the ground because that’s just so important to keep in touch with what’s what’s impacting people in business.

 

Fraser Jack 

Wonderful. Thank you, Tracy so much. I really appreciate you coming in and chatting with us today in giving us a really good insight of what’s going on in the association. My

 

Tracey Scotchbrook 

pleasure. Thanks for having me for

 

Fraser Jack 

the habit another episode of The X Y advisor podcast Fraser Jack here I’m joined by Emily Blanche. Hello.

 

Emily Blanch 

Hello, Fraser. Let’s get cracking. This is my favorite time of the week shout outs. Today we have a jewel shout out to xy legends Kelly house in the Sunshine Coast and Daniel Thompson in will have gone both legends run facilitate a local group on the platform for advisors, local in Sunshine Coast and also for advisors in Lagos. And they use it as a place to organize the occasional get together and meet up with other ex wives in that location. So I know Kelly recently organized a lunch with the Sunshine Coast crew know Daniel is in the midst of organizing a get together for the will and Gong tribe. So if you are in either of those locations, you can definitely join the group and come along to one of the events. And I guess if you’re in a location that hasn’t got a group on the platform, but you’d like to kick start with have a local meetup. You know, getting local x wires together to shoot the breeze and catch up over breakfast or dinner or coffee or a beer. Let me know we can definitely organize that for you. But yeah, shout out to Kelly and Daniel great to see some community engagement to kick off some face to face stuff.

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