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How to become a licensed accountant and not a product flogger

Kath Bowler - Thursday, June 25, 2015

Hundreds of accountants have approached me in recent months regarding their licensing options and overwhelmingly each one says, ‘I’m not interested in licensing because I don’t want to recommend products’. With the accountants’ exemption due to expire mid-2016, and given the confusion surrounding this issue, it’s time to do some myth busting to help accountants make an informed licensing decision.

Unfortunately, financial services licensing is required for much more than just specific product recommendations. Advice on strategies like Transition to Retirement (TTR) and superannuation contributions and even advice regarding binding death benefit nominations will normally require you to be licensed. So if you’ve been sticking your head in the sand thinking licensing doesn’t apply to you, you may need to reassess.

For accountants wanting to advise on strategy, but not product, ASIC’s ‘Limited Licence’ provides for this type of advice – allowing accountants to obtain a licence to advise on strategic issues, without getting involved in product or investment recommendations.

For accountants not wanting to obtain their own licence, there are a range of companies (licensees) that already have a licence that are authorising accountants. Most of these authority options do not even allow accountants to make specific product recommendations, beyond an SMSF. And many of these options are being offered by institutions. This is the case with the limited authority options offered by all the major institutions (Commonwealth Bank, NAB, Westpac and AMP).

If you are having difficulty understanding your options, you’re not alone. While there are a range of licensing options to consider, they all vary. This makes it extremely difficult for accountants to compare one offer with another. Variations not only occur in terms of what you are authorised to advise on, but also in terms of what ongoing support you will be provided (ie: advice software, templates, training and technical support).

The other major variation is in relation to referral arrangements. Many authorisations don’t allow you to make investment recommendations.However, there is often a catch in terms of who you must refer clients to when they are looking for specific investment product advice.

Authorisations that dictate your referral options should not automatically be ruled out as bad though. What is important is that you go in with your eyes open and understand any restrictions that apply, including what products referral partners will recommend to your clients. If you’re comfortable with the referral partner and their product recommendations, then that licensing option may be a good fit for you, particularly if you were introduced to the licensing option by your existing referral partner. However, for others, these referral requirements can come as an unpleasant surprise, so it’s important that you know what you’re getting yourself in for.

So while licensing certainly doesn’t mean you’ll have to recommend product, make sure it doesn’t mean you’ll have to refer clients to someone you’re not comfortable with, or in investment products that you have no confidence in.

Article published in Accountants Daily - 24 June 2015

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