Snapshot

Gareth Atkins, Synectic

This Licensing Diagnostic is designed for accountants working in public practice. From the answers given, it does not appear to be relevant to your situation. Thank you for your interest in our Licensing Diagnostic.

About your business

Current

Number of Clients:
Number of SMSF Clients:
Practice type:

Future (3-5 years)

Number of Clients:
Number of SMSF Clients:
Practice type:

You have indicated that you want to remain a compliance based practice over the next 3-5 years. There is a significant risk that firms who focus on compliance based work will have reduced profitability due to advances in technology and regulatory changes.

Even if licensing has no appeal to you, you may want to consider other ways to address the issue, such as mergers, specialisation, maximising your use of technology and outsourcing to increase your chances of success.

Growth Plans

No growth plans - you have indicated you are not currently looking to grow the business. You are happy 'business as usual' and are not interested in changing your practice as a result of licensing changes.

Growth Plans

Steady growth - you would like steady practice growth, and plan to increase the number of clients or increase the number of SMSF clients.

Growth Plans

Rapid growth – you are aiming for significant practice growth and want to take it to the next level. You are looking to change your practice to an accounting/advice based practice and will obtain a licence as soon as possible.

You have also indicated that you are looking to sell or retire in the next 3-5 years. Rather than investing your time and capital in licensing, you may want to consider entrusting this responsibility to someone else in the business to ensure a sustainable future. Alternatively, you might want to consider a buyer who can provide this service.

Investing in additional practice management support may also be worthwhile to maximise the sale value of your business.

Although a strategic authority best meets your needs in terms of the client advice you would like to provide, you have indicated that you are planning to allocate less than one day per week to this.

In our experience, unless you are dedicating at least one day per week to licensed advice (preferably more), the chances of making a successful transition are reduced considerably. Given the time and cost involved in becoming licensed, you may want to explore other options. For example, can others in your practice become licensed, or should you seek a strong referral relationship?

You have indicated you want to grow your business, but only plan to allocate a maximum of 1-2 hours per fortnight to this.

Licensing allows you to expand your advice services significantly, but you will not be able to capitalise on the opportunities if you do not allocate sufficient time and resources.

To maximise your success, you may want to consider:

  • Employing additional staff
  • Re-allocating work to existing staff to free up more of your time
  • Outsourcing more compliance and administration work to free up resources

You have indicated that you want to grow your business rapidly, but plan to allocate a maximum of one day per fortnight to this.

Licensing allows you to expand your advice services significantly, but you will not be able to capitalise on the opportunities if you do not allocate sufficient time and resources.

To maximise your success, you may want to consider:

  • Employing additional staff
  • Re-allocating work to existing staff to free up more of your time
  • Outsourcing more compliance and administration work to free up resources

You have indicated that you want to grow your business and plan to allocate at least one day per week to this.

Licensing allows you to expand your advice services significantly, and it is gratifying to see you setting aside sufficient time and resources to achieve this. If time does become an issue, you may want to consider:

  • Employing additional staff
  • Re-allocating work to existing staff to free up more of your time
  • Outsourcing more compliance and administration work to free up resources

About you

Your current role

You currently divide your time up as follows.



Your preferences


Adviser - you enjoy client interaction. You will need appropriate licensing to have in-depth discussions with clients. You should review office support/outsourcing so that you can spend more time with clients.

Adviser/technician - you enjoy client interaction but are very strong technically and like to use/test these skills.

Technician - you are methodical and like to solve problems. You are across all the latest strategies and opportunities and can probably quote sections of the SIS Act.

Technician/entrepreneur - technically, you are very strong and have an entrepreneurial flair. You are constantly looking at ways to grow your business and can see the opportunities in the SMSF market.

Entrepreneur - you prefer working on your business, rather than in your business. You’ve expanded your business and take a strategic big picture view. You have good people and systems in place to help you reach your goals.

Entrepreneur/Adviser - you love building successful businesses, but equally enjoy client interaction.

Blend - you have skills across all three areas –probably one of the reasons you went into practice. However, there are not enough hours in the day to grow the business, interact with clients and manage the team.

Are you currently spending your time doing the things you enjoy? It may be worth using the licensing changes as an opportunity to review your current and future roles.

The licensing solution to take you there

Your authority level

Licensing options can broadly be categorised into three levels – SMSF Specialist, Strategic and Comprehensive.

Based on your responses, the best licensing solution for you is , as indicated below:


For further information regarding your authority level and why this level has been recommended, refer to the ‘Licensing in Detail’ section of the report.

Authorities vary significantly from licensee to licensee. To ensure you select a licensing solution that meets your needs, please refer to the detailed section of this report for information on the specific areas of advice you want to provide.

Self Licensed -v- Authorised Representative

Based on your responses, you are best suited to becoming self-licensed.

For further information on self-licensing versus becoming an authorised representative, and why this option has been recommended, refer to the ‘Licensing in Detail’ section of the report.

Based on your responses, you are best suited to becoming an authorised representative.

For further information on self-licensing versus becoming an authorised representative, and why this option has been recommended, refer to the ‘Licensing in Detail’ section of the report.

 

Your Transition Pathway

RG146 Training

ASIC has training requirements that must be met before you can provide licensed advice. These are outlined in ASIC’s Regulatory Guide 146 (RG146). You will need to demonstrate that you have met these training requirements before any advice can be provided.

Please note that in addition to the RG146 categories listed below, you will also need to meet ‘Generic Knowledge’ and ‘Skills’ requirements. There are some courses available that do not cover Skills so make sure the course you select isn’t one of these. For Generic Knowledge, many RG146 providers provide exemptions for this if you are an accountant. Make sure that your chosen provider will give you an exemption, or that this RG146 component is covered in any training that you complete.

Based on your responses, you will need to complete the following RG146 training.

Financial Planning

Superannuation

SMSFs

Life Insurance

Managed Investments

Securities

Margin Lending

This RG146 assessment does not take general insurance into account, which is a separate specialist area. If this is an area you would like to provide advice on, make sure your training meets the RG146 requirements in this area.

Your responses indicate that you will need to complete RG146 training in all of the areas above. Rather than completing stand-alone courses in each area, the most practical way to address your RG146 training needs is to complete a Diploma of Financial Planning from a Registered Training Organisation (RTO). Make sure that the course covers both managed investments and securities. Also, if you intend to provide advice on Limited Recourse Borrowing, make sure that your course addresses Margin Lending as this not always included as standard in Diploma courses.

Based on the answers you have provided, we recommend that you obtain your own licence rather than become an authorised representative. As such, you will need to comply with the requirements of RG146 as an adviser, but will also need to comply with the requirements of RG105 as the responsible officer for your licence.

From a training perspective, RG105 and RG146 are the same. However, some concessions for accountants currently apply to meeting the training requirements of RG105 during the transition period to July 2016. As no such concessions apply to RG146, you may not need to meet the training requirements before applying for your licence, but you will need to meet them before providing any advice.

Additional training and support

The support and training recommended here is not a legal requirement but, based on our experience, makes an enormous difference to whether accountants transition successfully or not. This training/support can be broken into three key areas:

  • SMSF training – to maximise the value of licensing and build on the expertise and reputation of accountants, we recommend all accountants complete advanced SMSF training
  • Induction/transition support – this assists you in writing your first SOAs and incorporating advice into an accounting practice. It should include an understanding of the issues around running both an accounting and licensed advice business
  • Self-licensed support – this assists you both in applying for your Limited Licence and in ongoing management of your licence obligations.

Based on your responses, we recommend you seek support in the following areas:

SMSF Training

Induction/Transition Support

Self Licensed Support

Licensing in Detail

Becoming licensed opens up significant opportunities. To maximise these opportunities, you need to ensure the right licensing solution for you and your practice.

If you become licensed, one of the most important decisions is self licensing versus licensing through someone else (becoming an authorised representative). The pros and cons are explained further in this section of the report, as well as a personal recommendation, based on the responses you have provided.

Regardless of the option you choose, you will need support in three key areas:

  1. Compliance support - to ensure you comply with the law
  2. Operational support – so you can provide advice in an efficient and effective manner
  3. Practice management support – to help you grow your business and capitalise on the opportunities of being licensed

For authorised representatives, this support should come from your licensee. For those becoming self-licensed, we recommend engaging outsourced providers to assist you.

While the level of authority you have will impact on the compliance support you need, all quality licensees (or outsourced providers) should offer a similar service. For example, a clear scope of authority, advice guidelines and regular audits. For a detailed checklist on what to look for with compliance support, refer to the checklist in the appendices.

Operational support and practice management support vary considerably from licensee to licensee. Individual needs also vary considerably depending on in-house resources and other arrangements.

This section of the report looks in detail at the authority level you need.

An AFSL holder can authorise individuals to provide the full range of activities permitted by their licence. Alternatively, they can choose to offer ‘reduced’ authorities. The initial training requirements to obtain those authorities are reduced to match the advice that can be provided.

Licensing options can broadly be categorised into three levels – SMSF Specialist, Strategic and Comprehensive.

  • SMSF Specialist licensing tend to mirror the exemption that is being removed, so are limited to the establishment and wind up of SMSFs. These are also referred to as basic or essential authorities
  • Strategic licensing tends to mirror the limited licence that is now available through ASIC. They allow accountants to provide a much broader range of financial advice but exclude involvement in specific product recommendations
  • Comprehensive licensing allows you to provide a full range of financial advice including product recommendations.

Please note that authorities vary significantly from licensee to licensee and these are broad categories only. If you are comparing different authorities, it is extremely important to check the underlying activities that authority allows you to advise on, not just the name of the authority.

Also be wary of any licensees that are offering extensive advice areas, but only require a short RG146 course.

Your authority level

Based on your responses, the best licensing solution for you is , as indicated below:


This recommendation is predominantly based on the areas you indicated you wished to advise on. However, given the time and cost involved in licensing, we have also indicated if we feel a referral option could work better for you. This is based on your responses about the amount of time you are planning to allocate to providing licensed advice.


Authority levels vary

Note: Authorities and their flexibility vary significantly from licensee to licensee. Below is your response to the areas you want to advise on. Use this detailed list to ensure any authority you are considering covers all those advice areas.

If you are suited to Strategic licensing, please note that this checklist correlates with the Limited Licensing option available directly from ASIC.

Based on your responses, licensing is either not required for your practice, or the cost and effort involved means that a referral arrangement is likely to be a better solution.

Area You want to advise on You do not want to advise on
SMSF Strategies
Establish and wind up SMSFs
General advice comparing SMSFs with other super structures
Limited recourse borrowing arrangements
Investment advice & preparing investment strategies
(No specific product recommendations)
Insurance needs analysis
Direct property transfers
Reserving strategies
Super and retirement strategies (generally)
Contributions advice
Rollovers
Transition to retirement
Retirement income streams
Receiving death benefits
Re-contribution strategies
Retirement projections
Intergenerational and succession planning
Lump sum withdrawals
Other financial planning strategies
Cash flow and budgeting
General advice
Debt management
Centrelink
Gearing & margin lending (outside of an SMSF)
Salary sacrifice
Insurance
Life & income protection insurance
Business insurance (key person)
Risk profiling and asset allocation
Risk profiling
Asset allocation
Product advice
Basic deposit products
CMTs
Direct shares
Insurance products

Your Strategic/SMSF Specialist authority means your clients will still need to seek the advice of another licensed adviser if they require investment advice or specific insurance recommendations. We strongly recommend you take an active role in finding a referral partner who is compatible with your business. Otherwise, there is a risk your clients will seek advice from your competitors.

You have indicated you are interested in Strategic/SMSF Specialist licensing. However, you have also indicated that you like to control all aspects of your clients' affairs. You may find it difficult to find a referral arrangement that will work for you. You may want to consider a Comprehensive licensing, or bringing that function in-house to allow you to retain control.

You have indicated that you are looking at licensing but will maintain 'business as usual'. Licensing requires an investment of time and money and can be a costly exercise if not used to its full potential.

We encourage you to consider the additional opportunities that can come from licensing. Alternatively, a strong referral arrangement could be a better fit and achieve the same outcome for your clients.

Self Licensed -v- Authorised Representative

A major challenge for accountants is deciding whether to self-licence or be licensed through someone else (authorised representative).

The tables below outline the pros and cons of each option:

Self-licensed

Pros Cons

Full control over your business and client

You take on the licensing and advice risks

Economies of scale for larger practices

Additional time and resources are needed

Specialist advisers, particularly in the SMSF space may find licensees too restrictive

Not recommended if you have no experience in licensing, or are not partnering with a consultant to assist you with your licensing obligations

SOA templates are too clunky or lengthy

Authorised representative

Pros Cons

Quicker and easier

Finding a licensee that shares the same values as you

Can offer more support

Finding a licensee that offers what you want and need (not too little, or paying for things you don’t need)

Allows you to focus on advice requirements, rather than advice and licensing requirements

Finding a licensee that understands accountants and strategic advice

Tools, templates and technical support should all be provided as part of licensing

Finding a provider that can cater for specialist SMSF and advice and advice that incorporates the needs of small business owners

Other support such as practice management often also included in your licensing fee

Our recommendation

Self-licensed

Based on your responses, you are best suited to becoming self-licensed.

Authorised Representative

Based on your responses, you are best suited to becoming an authorised representative.

 

The key factors we have taken into account in recommending whether you should become self-licensed or not are:

  • Your confidence in meeting the ‘appropriate advice’ requirements
  • The time you, or someone in your practice can dedicate to meeting your licensing requirements (at least 1 day per month)
  • Processes in your business to ensure you can manage your licence obligations effectively and efficiently.

We also looked at your level of SMSF expertise and preferences about making product recommendations as, in our experience, these are areas that advisers find too restrictive when operating as an authorised representative.

Please note that this recommendation is a guide only and is based on your responses at this time. It is important to let your business needs drive your licensing decision; you can and should review your licensing situation over time to ensure it continues to meet your needs.

Having your own licence requires support, so don’t try to do it alone. You are responsible for the advice; it has to be appropriate, not just possible. We have developed a range of support services to ensure you achieve the right outcomes for your business. Please review the checklists in the appendices for further guidance.

While you would ideally like the freedom and control offered by self-licensing, your responses indicate you are not looking to commit more than eight hours per month to managing your licensing obligations.

We recommend that you, or someone in your practice, dedicates at least one to two days per month to managing your licensing obligations, even if outsourced service providers are engaged. This is in addition to the time taken to provide the advice itself.

Being an authorised representative means that your licensing obligations are significantly reduced. However you will still need to dedicate some time to tasks such as developing systems, processes and templates for your business.

You indicated you are only planning to invest four hours per month or less. This may not be sufficient to meet your obligations, particularly in the initial set up stages.

Operational Support

Providing licensed advice is quite different to the advice accountants typically provide. This is largely due to the disclosure obligations and other legal requirements that ensure you can demonstrate the advice is appropriate for/in the best interests of the client. Operational support ensures you can provide this licensed advice in an efficient and effective manner. You may need support in any or all of the following areas:

  • Software and templates - including plan writing software, financial modelling and CRM systems
  • Research
  • Paraplanning
  • Technical support - particularly around the advice process, and completing fact finds and Statements of Advice
  • SMSF technical knowledge -if you are providing complex SMSF advice and require support from experts
  • Branding and marketing support – to assist in preparing stationery that addresses disclosure requirements; and marketing templates and letters that can promote your new advice service to clients

Depending on your experience and current practice resources, your operational support needs will vary. The table below highlights the areas where you are looking for support, based on the responses you provided.

Software & Templates Paraplanning Technical Support SMSF Technical Knowledge Research Branding & Marketing Training

 

Your responses indicated that you are likely to need some para-planning support to assist in meeting your advice needs. Para-planners offer two types of service – technical support for plan construction and back office administrative support. If you are going to rely on paraplanning, make sure they have an easy lodgment process and good turnaround times (ie: 5 days or less).

Another area that licensees provide support in is training. Most quality licensees have an ongoing CPD commitment of 20 hours or more per annum for strategic advisers, and 30 hours or more for comprehensive advisers. You have indicated that you live in a regional or remote location. You should investigate how ongoing CPD is delivered, as online training may be a better fit than face-to-face training. Also investigate if you will be required to attend an annual conference – and how this is funded (ie: as part of your annual fee, or an additional cost).

The information above shows what operational support we think will be important to you. To further assist you, we have provided some useful questions to consider for each key operational area. Make sure you are comfortable with the responses provided by a licensee, particularly in the areas you are seeking the most support.

Key Operational Area Useful Questions to Consider
Software and templates

Do they have plan writing software. Is it included or an additional charge?

Do you have to pay for software if you don’t use it? (ie: if you are only taking a SMSF Specialist authority)

Do you have access to other software for CRM systems, modelling and projections, portfolio tracking etc. Is it included or an additional charge?

What training and support is provided for the software?

Research

How is the Approved Product List (APL) put together & updated?

How many products are on the APL?

What is the process for obtaining approval to recommend products that are not on the APL?

What resources are dedicated to internal and external research?

Are you restricted in the platforms you have to use?

Are they treating SMSF administration services as products that require approval? If so, what is their policy for licensed accountants that offer their own SMSF Administration service?

Para-planning

Is there a para-planning team?

How many are in the team?

What is the turn-around time?

What is the experience of the para-planner?

Can they assist with strategies?

Technical support

What support is there to write your first Statements of Advice?

Is there a hotline or a dedicated person to support you when you provide advice?

If guidance is provided by advice coaches, how many advisers does each coach support? (Any more than 1 to 100 advisers won’t support you adequately)

SMSF technical knowledge

What expertise is there from the technical team for SMSF advice?

Who provides that advice?

What training have they had?

Do they understand the accounting exemptions and how they cross over with advice you may provide?

Training

How much training is provided as part of the licensee fee?

How is it delivered? (face to face, distance)

Who provides the training? (is it specific trainers, or is it subsidised by fund managers)

What specialist SMSF training do you provide?

Are you required to attend an annual conference and if so, where are the conferences held and what do they cost?

Brand and marketing support

Do they provide assistance in preparing stationery specific to your advice business, including meeting ASIC requirements?

Do they have a style guide that can be easily adapted?

Do they have any providers who can prepare your stationery?

Practice Management Support

Business coaching and practice management support are common place in the financial planning industry. These inbuilt support services can maximise the value of licensing and particularly help small businesses work smarter.

Some larger licensees provide this type of support effectively, albeit with an ulterior motive in many instances – as their fee is based on a percentage of practice revenue.

Sometimes this support is incorporated into the licensee fee but in other instances it is an additional charge. The level of practice management support offered by licensees is probably the biggest reason for variances in licensee fees at the top end of the scale, so it is important that you select a licensee who meets your needs.

If this is not an area of support you need, try to avoid licensees where this support is built into the fee, regardless of whether or not you use it.

Depending on the size of your business and how much you have invested in this area in the past, practice management support may ensure the move into licensing is a profitable and successful one for you and your practice.

Practice management support can include the following:

  • Business planning
  • Succession planning
  • Funding for mergers and acquisition of practices
  • Marketing
  • Assistance with client value propositions.

Based on your responses, the illustration below indicates how much practice management support you may need.

Practice Management

 

A word on costs

Cost is probably the biggest issue raised by accountants when considering licensing. Most also indicate this is at least partially driving their decision to self-licence or take out an authority.

You probably have realised by now that we have not taken cost into account in our recommendations about self-licensing versus becoming an authorised representative. While cost is certainly something you need to consider, we do not believe that cost should be driving this decision. Control, investment of time and resources, and flexibility to advise in your chosen areas, are the factors that should drive your decision.

Unless you have a large number of accountants needing to be authorised within the one practice, you will find the costs are not significantly different between obtaining your own licence and becoming authorised, particularly when you consider that time spent managing licensing obligations could have been used to generate advice income.

To sum up: look at the cost, but unless you have a large number of authorities in your practice, or you or a colleague have some experience with licensing, don’t let cost drive your decision.

You have indicated you are unsure what RG46 training you have completed, or have completed some RG146 training more than five years ago. To ensure you do not undertake further study that is not necessary we recommend an individual assessment. This can be done by a Registered Training Organisation or by the licensee that you intend to join. You may be able to undertake gap training to fulfill your RG146 and/or RG105 requirements.

Appendices

Compliance Checklist

There are a number of fundamental compliance obligations reflected in the law. Such requirements include disclosure obligations, the need to ensure the advice is appropriate and that it is in the 'best interests of the client'.

Licensees who appear less rigorous with their compliance may look attractive, but should be avoided. If ASIC determines that a licensees’ compliance and processes are deficient, it can cancel their licence. This could have a huge impact on your business as you could not provide advice until you found another licence holder. Importantly, your clients’ would be aware that your licence had been revoked.

Use the checklist below to identify those licensees that have strong compliance processes in place.

Area of Compliance Questions to think about
Reviews and audits
  • Do they have a documented audit process?
  • Are they auditing you at least annually?
  • Is there an initial vetting process? (3-5 plans at a minimum)
  • What background checks do they do on advisers who have been licensed elsewhere? (do they accept anyone, including banned advisers)
  • How many auditors do they have? (once the number of auditors to advisers exceeds 150, the level of audit support will be considerably reduced)
Guidelines
  • Do they have guidelines in place for advice?
  • In particular, what rules/guidance do they have on the following areas of advice – SMSF advice, limited recourse borrowing, direct property advice?
  • Do they have guidelines for any advice process they want you to follow? What guidance/restrictions do they have around you operating a planning and an accounting business?
Advice documents
  • Are advice templates provided or are you expected to develop your own?
  • How often are advice templates updated? (Quality licensees will be updating constantly, with a minimum change every month to one document or process)
Research and Approved Product Lists

This is only applicable for Comprehensive advisers. Do they treat SMSF administration providers as products that require approval? If you are providing your own administration services, or have a preferred outsourced supplier, you need to ensure your licensing arrangement will not impact on your administration arrangements.

  • How many products are on the approved product list?
  • Are you restricted with platforms?
External dispute resolution
  • Is your licensee a member of an external dispute resolution scheme? (this is required for licensees)
  • What processes are you expected to follow for handling complaints?
  • What support do they provide advisers through the complaints process?
Professional Idemnity (PI)
  • Is PI cover provided or is it an additional cost?

Glossary

ASFL: Australian Financial Services Licence
Authorised: An authorised representative of a licence holder
Self licensed: A person who operates under their own licence that they have obtained direct with ASIC
Licensed: Someone who is an authorised representative or operates under their own licence (self licensed)
Licensee: The entity that holds an ASFL (eg: SMSF Advice, Count)
Dealer group: Same definition as Licensee

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