Financial planning associations and accountant bodies have generally welcomed the replacing of the current licensing exemption for accountants with a new form of financial-advice licence announced over the weekend.
Minister for Financial Services and Superannuation Bill Shorten believes the new and limited Australian Financial Services Licence (AFSL) will significantly increase the availability of financial advice.
The reform will potentially create an opportunity for thousands of small-practice accountants and financial advisers who wish to grow and diversify their businesses.
Get a new licence
The new licence will be available to professional accountants who hold a public-practice certificate, which will replace the requirement for professional accountants to demonstrate the relevant experience to apply for the new licence.
However, professional accountants will still need to demonstrate they meet the training requirements to hold a licence and provide financial advice.
Minister Shorten’s office expects to see up to 10,000 accountants become licensed under AFSL and thus able to provide a much broader range of financial advice than they were previously able to.
In addition to being able to advise on self-managed superannuation (SMSF) funds and superannuation generally, licence holders will be able to give “class of product advice” on basic deposit products, general and life insurance, securities, and simple managed-investment schemes.
“This new licence will extend the consumer-protection provisions of the Corporations Act, such as the best interest duty in the recently passed Future of Financial Advice (FoFA) reforms, to financial advice provided by accountants,” said Shorten in a statement.
Importantly, the new licence does not allow specific product recommendations but is designed to enable accountants and any financial advisers who may hold this designation to provide more strategic and low-cost forms of financial advice.
In recognition of accountants’ existing professional qualifications, a transitional period from July 1, 2013 to July 1, 2016 has been made available to those wishing to comply with the AFSL regime.
Consultation before effect
There will be public consultation on draft regulations to give effect to these measures in the second half of the year.
“This replacement to the current accountants’ licensing exemption is a major step forward and will help to facilitate a significant expansion in the provision of financial advice to Australians,” Shorten said.
“As accountants begin operating within the AFSL regime, there will be more options for consumers to access low-cost financial advice on important issues including insurance and superannuation needs.”
The Financial Planning Association (FPA) welcomed the announcement, heralding the reform as creating a “level playing field” for financial advice while providing the industry with clarity.
It believes the measures will improve consumer access to quality financial advice, and complement the best interest components of the FoFA reforms passed last week by the Australian Senate.
“The FPA has long advocated for the removal of the accountants’ exemption. The announcement by the minister is a welcome affirmation of that position,” said FPA chief executive Mark Rantall.
“We expect the proposed conditional-license measures will remove inherent risk and uncertainty – and encourage greater industry competition – by evening up the disjointed playing field that is part of the current regime.”
The FPA view is that the new licence will address a grey area in consumer protection by ensuring accountants are licensed when providing “personal” financial advice.
The conditional license will be available to all advice providers, including financial planners.
Sweet deal for consumers
However, it is the accountants who were today hailing the new conditional licensing regime as a “significant win” for consumers.
In a joint statement, CPA Australia and the Institute of Chartered Accountants in Australia said millions of Australian consumers and businesses will for the first time have access to non-product-strategic financial advice from their professional accountants on a broad range of investment classes.
CPA Australia chief executive, Alex Malley claims that for many Australians professional accountants are still their only source of trusted financial advice.
“The objective of the FoFA reforms was to make financial advice more accessible and affordable for the Australian public,” he said.
“This final element of the FoFA reforms reflects the prominent role professional accountants play in the provision of financial advice, and will go a long way towards achieving the objectives of broadening access to financial advice across the community.”
Institute CEO, Lee White, said the announcement was proof that government had listened to its lobbying.
“From July next year, consumers and businesses will be able to have a deeper conversation with their professional accountants about their financial well-being and the strategies they should be adopting to safeguard their futures,” he said.
“CPA Australia and the Institute have been outspoken about this issue because it is so vitally important that the government gets this policy right. Today’s announcement confirms that we’ve been heard.”
Institute of Public Accountants chief executive, Andrew Conway, said public accountants operating under the new licensing regime will be in the best position to deliver low-cost, broad non-product-specific financial advice.
“These reforms will ensure that the trusted adviser to Australians, their public accountant, is able to assist them in making sense of today’s complex financial environment,” he said.
The opposition reserved comment on the detail of the new reform but questioned the timing of the announcement.
“Making this announcement, not during the working week or even on a Friday afternoon, but on a Saturday afternoon is clearly an unprecedented attempt to avoid scrutiny after Bill Shorten created two years of unnecessary uncertainty for accountants and their clients,” said Senator Mathias Cormann in a statement.
“As always with announcements from this government, the devil will be in the details and the coalition will consult widely with all stakeholders when Labor eventually releases the regulations giving effect to the changes.”
The accountants I know are rearward looking people who have never given proactive advice to their clients..how do I know…well my financial planning practice has a new accounting arm and we are stealing clients from accounants who are to slow to realise that clients want a secure future not just a compliant tax return…
So accountants get “authorised” to do what they’ve always done?
Just more allies to punch sense into ASIC ;-)
GOOD ONE BILL!
You and Julia must be taking the same medication.
See your accountant. As an F.P. I advise a client or make a recommendation. The client wants to ran it by his/her accountant.As do 50% of clients. Don’t have an issue with that.
They respond, thats exactly what I was going to recommend myself, but you got to me first.
As I am your “TRUSTED” accountant, you will of course do the business through me.
Have a spare room I can rent out to a family of “boat people.”
Bill, will you put in a good word for me.