The July 1 deadline for gaining a limited Australian financial services licence (AFSL) under Australian Securities and Investments Commission’s (ASIC) relaxed transition rules has come and gone, and the regulator is homing in on accountants giving advice beyond their scope.

There’s no doubt that ASIC and the Australian Taxation Office will work together to monitor new SMSFs and who’s establishing and auditing them in order to identify those who are potentially doing the wrong thing, either consciously or unconsciously.

In ASIC’s freshly-released Corporate Plan for 2016-17 to 2019-20, it listed new licensees and unlicensed accountants as a key area of surveillance.

Logically, there’s bound to be more than a few accountants overstepping the mark given ASIC had only granted 366 limited AFSLs as at August 11, from 1159 applications. More than 500 applications were still under review while 284 had been withdrawn or returned, and two had been rejected.

What are the 786 or so accountants represented by those applications doing? They can’t conduct business as usual.

And let’s not forget that ASIC originally anticipated up to 10,000 applications before the end of the three-year transition.

The upshot is that accountants who failed to lock in a licensing solution by July 1, 2016, can no longer recommend that a client set up or wind up an SMSF.

Not only do they face hefty financial penalties and potential jail time if they break the law, but they’ll likely find they’re not covered by their professional indemnity (PI) insurer.

PI is the industry’s big sleeper because accountants won’t be protected against potential losses tied to advice, omissions or errors if it’s deemed they gave unauthorised advice.

But they face another dilemma. They can’t apply for a limited licence under the relaxed transition rules either. That boat has sailed.

While they can still apply for a limited licence, now they must demonstrate they have three years’ experience providing licensed financial advice to meet the Responsible Manager requirements.

The best way to move forward

For many accountants, remaining unlicensed and referring clients to another accountant or financial planner isn’t a palatable or sustainable long-term solution.

The most practical and quickest solution for those who want to continue providing advice on the establishment and closure of SMSFs is to become authorised under another entity’s AFSL.

After assessing the market and selecting a suitable, culturally-aligned licensee, the process of being appointed as a limited authority by a dealer group can take several months, depending on how long it takes an accountant to complete any necessary education and training.

To expedite the process and get back in front of clients as soon as possible, licensees like GPS Wealth have distilled the process into six simple steps.

Step 1: Complete a two-day RG 146 course covering generic knowledge, superannuation and SMSFs, and pass the assignment.

Step 2: Apply to a licensee to become a limited authority.

Step 3: Undergo their required background and reference checks including a police and bankruptcy check.

Step 4: Complete ASIC’s registration process.

Step 5: Complete the licensee’s onboarding process which will likely include a one-day induction course and training.

Step 6: Become officially appointed by the licensee as a limited authority.

The big sleeper

Since many accountants double as small business owners, they need to protect their assets and themselves by ensuring they’re authorised to give advice and have adequate PI cover.

From a regulatory and PI perspective, accountants need to know what they are covered for and what they’re not covered for, so they don’t overstep the mark.

Many dealer groups use their scale to negotiate, and offer their authorised representatives a standard level of cover at a competitive price. Dealer groups with a long, clean history of delivering quality, professional advice – evidenced by a strong compliance culture and a minimal policy excess and few claims – will be able to secure optimal cover.

Accountants who value independence should also look for a licensee with no ties to a product manufacturer.

For those who still want to apply for a limited AFSL, it’s important to find a broker that understands the nuances of providing financial advice and can successfully relay to insurers a practice’s compliance procedures, advice processes and systems, ongoing training and education, in order to get the right level of cover at a competitive rate.

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