One on one with…Leo Guterres

Central Securities founder Leo Guterres gained entry to the SMSF sector when looking to improve his business network as an accountant turned financial adviser. He tells Tharshini Ashokan about his concerns over the number of financial planners exiting the industry and how providing financial advice is such a great opportunity for accountants.

How did your involvement in the SMSF sector happen?

I come from an accounting and finance background. My father was an accountant and my grandfather was a stockbroker. I was an accountant first and I tried all sorts of versions of chartered accounting – auditing, insolvency and small business accounting. Then I came to the realisation it didn’t quite hit my mark. It took me a while before I got into the SMSF space. I was in general business for eight or nine years and then, in the mid-nineties, I took a turn of career. A colleague of mine said the best thing for me to do would be to get training from the banks because they had the resources and they were looking for financial planners. So I joined Westpac to get my first authority in 1997 as a bit of a foray into this area. You might be trained before as an accountant and as a general business person, but there are certain skills you need to pick up. Certainly, you must know the products, you must know the rules. And you’ve got to get to know people. I had to figure out how I was going to get clients, so I approached chartered accountants who were in business and just introduced myself. In my quest to network I joined and helped run the sub-committee of the financial planning chapter of Chartered Accountants Australia and New Zealand (CAANZ) in New South Wales. Accountants began making referrals to me to look after the investment side of their clients’ SMSFs, which I enjoyed. After that I started taking on SMSF clients directly.

What services do you offer at Central Securities?

I take a holistic view of things so while I may be mostly thinking about SMSFs, I will not reject someone who does not want to set up an SMSF. For new SMSF clients, I set up the trust deed for them and I source various people to help me so I can provide them a full service. My passion is in the investment space. There is a small subset of people who enjoy the investment side of things, and some people outsource it, but I really enjoy that space. With regard to SMSF administration, I have always searched for innovative ways to provide a solution for people. I have an outsourced team here in Sydney who are focused on providing SMSF admin services for clients. Obviously, there’s a good trust relationship between us and everything is directed by me.

How challenging is the technical aspect of SMSF advice?

I’ve been in this business for nearly 20 years, where most of the time you need to comply with the standard compliance regime. I find attending SMSF conferences and networking is purposeful for me in terms of helping me refresh my technical knowledge. The good thing about attending industry conferences is you are introduced to people who you know you can call on for assistance with the technical side. I often draw upon the Top Docs technical team. Also my own SMSF administration provider has a law degree, so when I’ve got some technical things to check, I’ll check with him. In addition, I sometimes contact Macquarie and Colonial First State, who both have strong technical teams. If I need to make a call to just crosscheck my concepts, I will do that. As long as you tell them what you are trying to achieve, and obviously I will come to them with an idea, they will actually send me a technical reference. So the technical side I’m not too worried about.

Has your accounting background helped you in the SMSF space?

From the client’s point of view, it has helped me gain credibility very quickly. It’s definitely helped in the SMSF space, especially with compliance. Cross-checking investment strategy, cross-checking trustee declarations, these are all things you’re used to when you come from an audit background because you have so many checklists to complete. I think my accounting background keeps me out of potential trouble down the track. If a client wants to do something interesting, something fancy, I will ask them who their auditor is and contact the auditor myself. It’s much better to go to the source before you set things up.

Is there too much legislative change in the sector?

Absolutely. I think what has happened is because the SMSF sector is now responsible for such a large portion of assets, politicians can no longer ignore it. They are more cautious and, as a result, the pendulum in terms of regulation has swung too far in that direction. I feel for the chartered accountants. It would be a very small proportion of SMSF accountants that have actually breached regulations and compliance, yet the legislation seems to be more and more focused on them.

Is the provision of SMSF advice a lucrative area for accountants?

The answer is yes. I think there is a gulf between what they used to do with tax, providing advice there, and financial services and financial products. I have first-hand experience where an accounting firm has specifically chosen not to give financial services advice because the managing director sees it as a risk. He sees it as a sideshow, whereas we advisers see it as an essential component. I think there’s too much worry on the compliance side and licensing side, and that’s why accountants are not pursuing it. I have an inner desire to try to marry these together, but I need the accountants to buy into this and not see advisers as charlatans. I tried to ignite this buy-in back in 2001 and 2002 when I was involved with the CAANZ sub-committee. It was when all the financial services reforms were starting to evolve. I look back on it as an opportunity that was lost for accountants to step up into the advice arena back then. Even now I still don’t believe they have caught on to this opportunity. If they would just put aside the mass media noise that bashes financial planners, they’d be able to seize the opportunity, but I think they’re fearful they’ll be tarnished with that same brush.

How do you feel about the new Financial Adviser Standards and Ethics Authority (FASEA) educational and compliance requirements?

For myself, it means that I have to go through the procedure of attending the financial advisers exam. Fingers crossed, between the CAANZ and SMSF Association, I should get enough credits. I even contacted my old university, UNSW, a few months ago for a copy of my academic transcript so I could check the subjects I had taken. I see it as a bit of an inconvenience and I think, very sadly, the industry will lose quite a lot of experienced advisers as a result of the changes. In terms of whether the changes to FASEA requirements will drive accountants away from wanting to enter the advice space, I don’t know what the answer is. You can be sure some of them will completely opt out. I think for some accountants who were on the fence about entering the advice space, they won’t even look at this as an option anymore. Ultimately, I think there will be some flux in the short term, followed by some stability.

What’s the most significant change you’ve seen in the industry?

When they started the SMSF Professionals’ Association of Australia, now the SMSF Association, it was mainly accountants and auditors involved who were already technical. The change I’ve seen since then is having financial planners engaging in the SMSF sector. In the beginning, I knew some financial planners who said SMSFs were too difficult and that they preferred using a platform and managed funds. Now, maybe because of media focusing on the benefits of the sector, I think financial planners have gotten more involved in the SMSF space.

If there was one thing you could change about the sector, what would it be?

It would be good if politicians didn’t use it as a political football. Even that alone would be a great benefit. To give us the confidence, to give the consumer the confidence, that things won’t change, I think that is quite an important thing.

What’s the biggest challenge facing the sector in the coming 12 months?

I think it would be the FASEA requirements and exams. There are a group of people that are depressed about this and it’s actually getting a bit serious. Another challenge for some is the change to grandfathering commissions. I think that’s going to affect some advisers quite seriously. In the industry, there are advisers on their second marriages and through family law provisions they’ve given their first wife or husband the family home. They’ve then borrowed money to buy a business. And suddenly, by mid-next year, they’re going to lose their revenue. How do you reconstruct your life after that? I think that’s the biggest challenge.