If you’re an accountant impacted by the changes to financial services licensing and are confused about your options, you’re not alone. You’ve no doubt been bombarded with phone calls, emails and seminar invitations from numerous companies offering a range of licensing solutions. You’ve probably received updates from your professional body and the new limited licensing solution from ASIC. However, before you even consider these options, you should take a step back and work out whether you need licensing at all. Once you’ve made this decision, then you can get down to the nitty gritty of the various licensing options.
The question most accountants are asking is ‘how do I work out if I need licensing’? When conducting conversations with your clients, consider the following questions when assessing your options:
- Are you being pro-active or reactive? Are you simply responding to the questions your clients are asking you, or are you actually asking questions of your clients and initiating contact to advise them of opportunities, such as Transition to Retirement (TTR) strategies?
- Are you probing clients for more information and providing alternative suggestions or simply responding to compliance-based questions?
- Is the client seeking more direction? Do they want guidance or approval for an idea or are they seeking straight compliance?
- If you don’t provide any advice, would that result in a contravention or compliance breach?
If you are only offering SMSF compliance and administration services, you may not need a licence as there are a number of exemptions that will remain in the financial services legislation to cover you for this type of work. For example, one of the exemptions makes specific mention that you can offer compliance advice in relation to S.52(2)(f) of the SIS Act and Reg.4.09 of the SIS Regulations, which covers the following:
- Risks, returns and impact on cashflow.
- Composition of investments regarding diversification.
- Liquidity issues regarding cashflow needs.
- Ability to discharge liabilities.
However, if you are running an advice based business and/or want to take a pro-active role in the advice you provide to clients, I don’t believe you will be able to do this without some form of licensing. After answering these four questions, you’ll know if you need an AFS Licence or not.