Accountants who want to continue to give advice on self-managed super funds (SMSFs) after July 1, 2016, will need to be licensed and should consider a limited Australian financial service licence (AFSL), according to an information session held by legal firm Holley Nethercote.
A limited AFSL will allow accountants to continue to operate in the same way they do now, and also enable them to provide “class-of-product” advice, the session heard.
A limited AFSL allows an accountant to:
• Give financial product advice on SMSFs;
• Arrange to deal in an interest in an SMSF;
• Give financial product advice on existing superannuation holdings (if the advice is only to set up an SMSF; or if the advice relates to an existing fund’s pension or contributions arrangements); and
• Give class-of-product advice.
Class-of-product advice includes superannuation, securities, general insurance, life risk insurance, basic deposit products, and simple managed investment schemes.
Holley Nethercote partner Paul Derham says an accountant with a limited AFSL cannot give financial product advice about a specific, named product – they can, for example, tell a client they should have a certain level of insurance cover, but cannot recommend a particular policy; or they can recommend a client hold a certain amount of cash, but cannot recommend a specific cash management account.
And they cannot deal in a specific financial product, other than recommending that a client roll into an SMSF.
Derham says applying for a limited AFSL has the very significant additional benefit of not requiring an accountant to provide “a phonebook-sized” summation of “relevant experience”.
Both limited AFS licensees and full AFS licensees are required to nominate responsible managers (RMs). An RM for a full AFSL is generally required to be at least RG146-compliant, or to have had at least three years’ “regulated experience” in the past five years . However, the rules for a limited AFSL are more relaxed.
“The thing that makes this remarkable is the person or the business applying for the [limited] licence does not need to show competence,” Derham says. Holding a practising certificate is sufficient.
Accounting firms need to consider whether a limited AFSL will enable them to do all they want to do in future. Derham says it is often simpler to apply for a full AFSL – despite the more onerous RM experience requirements – but still provide limited advice for the time being, than it is to apply for a limited AFSL upfront and then seek to vary it later.
Derham says accountants who wish to obtain an AFSL should not leave it too late, ideally applying before the second half of 2015.
He says the Australian Securities and Investments Commission is likely to be inundated by applications as the deadline looms, and any accountant not licensed in one way or another after the July 1 deadline must stop providing any financial services until a licensing arrangement is put in place.
