Accountants keen to stay in the SMSF space.
One in four accountants who are SPAA members and not operating under a AFSL have decided to apply for a limited licence or become an Authorised Representative (AR) of a licensee now – an encouraging sign considering the accountant’s exemption remains in place until 30 June 2016.
Liz Ward, Head of Education Services for the SMSF Professionals’ Association of Australia (SPAA), says polling done at SPAA events on this issue shows another 50% of members who are not licensed accountants are “seriously considering this option”, with only 25% indicating they might not apply for a limited licence or become an AR.
“This is an encouraging trend, especially when you consider the timeline involved. Quite clearly members are thinking seriously about this issue and we would expect many of those considering this option to ultimately commit to it,” she says.
Ward says it’s imperative that accountants understand there are pros and cons of being an AR as opposed to getting a licence directly with ASIC (either full or limited), and they must decide what best suits their business model.
There are a number of benefits of becoming an AR, especially for those new to the AFSL regime. These include:
- The investment in the licence with ASIC is undertaken by the licensee;
- ARs may have access to more licence authorities than they would receive from ASIC if they went directly;
- All the ongoing requirements are usually met by the licensee, such as initial and ongoing training, PI Insurance, membership of EDR, compliance requirements, disclosure documentation.
Along with the benefits, there are other considerations that might tip the balance towards pursuing other licence avenues; such as:
- ARs pay a regular ongoing fee to the licencee;
- ARs may be subject to strict contractual requirements, particularly regarding supervision, compliance, reporting, client confidentiality, and disclosure documents;
- ARs branding rights may be restricted in favour of the licensees’ branding;
- There could be a conflict between the licensees’ range of business ventures versus the AR’s business.
Ward adds there is also a cost issue. ”There are a range of costs that are being cited; we are hearing that the price to prepare and submit an application for a limited licence may in the vicinity of $25000 – $35000 in the first year.
“This includes compliance consultancy fees to compile the application and having all the components required to support the application in place. A DIY approach is an option and could provide cost savings but like all DIYs usually results in an increase in the time and input required by the individual.
“With either approach, accountants can expect to take up to 12 weeks from beginning to end of the application process, and when added to the required RG146 or other types of training programs they need to do initially, the lead time starts to add up.”
Ward says although three years seems a long time, accountants have to appreciate this is a considerable process and one they need to consider carefully and not leave too late.
“In SPAA’s opinion those who elect to be early adopters of the new regime and formally move into the SMSF advice space (via AFSL or AR) are likely to realise commercial benefits compared with those who come to it late. We are hearing of a number of accountants who are actively positioning their business based on their ‘SMSF expertise’.
“As an association dedicated to SMSF professionals and the provision of quality advice to trustees, we think it is great that there are many accountants that have already formally committed themselves to being in this sector.
“We would encourage those who are thinking, but yet to decide, to research their options and if SMSF advice is part of their business future to take the lead and start moving in that direction,” she says.
