All too often I see the following options presented for accountants when considering their options with licensing - Do nothing; Refer; Full AFSL; Limited AFSL or authorised representative. Erase this from your minds now and follow my simple three-step process to determine your options:
Step 1 – To licence or not to licence
At this point it’s completely irrelevant whether you obtain your own licence or not, it should just be about whether you want or need that capability. To help you make that decision, you should be aware of the following points (covered in my previous article):
- Understand the exemptions that remain for accountants as well as the one that is going.
- There are different levels of licensing. Work out what you want to advise on, and this will determine what level of licensing you need.
- Your initial training needs will vary considerably, depending on the level of licensing that you choose.
- Don’t even think about whether you want to have your own licence or not, until you’ve made the initial decision about licensing or not licensing.
- Let your business model, your clients and/or your work preference drive your licensing decision, and not the other way around.
Step 2 – Authorised representative or obtaining your own licence
Once you’ve decided that you do need licensing, the next step is to determine whether to obtain your own licence or become an authorised representative of another licensee. All too often the option of full licence versus a limited licence is presented here. But in reality, an accountant with no financial services experience is unable to obtain a full licence initially as they will not be able to meet the initial experience requirements. I question. (say why it’s?) I question why it’s even flagged as an option.
So really, it’s between a limited licence and becoming an authorised representative. Stated simply, the key difference between the two is that as an authorised representative, you are responsible for the advice requirements, but if you hold your own licence, you are responsible for the advice and licensing requirements.
The tables below outline the pros and cons of these two options:
Key factors you should consider when deciding whether to become self-licensed or not are:
- Your confidence in meeting the ‘appropriate advice’ requirements.Your confidence in meeting the 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.
Step 3 – Determine your referral arrangements
Most accountants are currently considering their options and deciding between a referral arrangement, becoming authorised or obtaining a limited licence. However, referralsReferrals are not mutually exclusive and will be required, even if you become licensed – unless you go the whole way and take out a comprehensive authority.
If you become licensed or authorised, any existing referral relationship is likely to change as you are now taking on some of the services you previously referred out. But this is a topic for another day.
Article published in Professional Planner Magazine - April 2015