Accountants must be wary of the opportunity costs associated with acquiring an Australian financial services licence (AFSL) in assessing their course of action when the exemption regarding SMSF advice was abolished, according to the head of an accounting firm.
Count Financial chief executive David Lane said the opportunity cost would come in the form of the tasks the appointed responsible managers would have to undertake if an accounting practice became licensed.
“ASIC will want the most senior people in the firms to be responsible managers and accountants have to ask how much do those people charge on an hourly rate to clients,” Lane told selfmanagedsuper.
“Because for a reasonably significant proportion of their time they won’t be charging clients as they’ll be undertaking their responsible manager duties – and these duties are reasonably significant.”
Lane, who is a responsible manager for Count Financial’s AFSL, said he spent half his time fulfilling those duties.
“Assuming accounting partners are charging $350 per hour for their time, which among our members is an average rate, that’s the amount of money they could be generating by spending time in front of a client, but are not because they are doing this,” he explained.
“When you add all of that up, the amount of money to acquire a licence will cost around $160,000 and to run one is going to cost you just under $150,000 per year.”
He said that meant accounting practices would have to make at least an additional $150,000 in revenue to make being an AFSL holder viable.
“The question I guess I have, particularly for those firms who say they don’t really want to do significantly more than they currently do today, is can you generate those types of revenues?” he said.
He warned accountants must weigh up the magnitude of the situation as the regulator would probably not be satisfied with one individual handling all responsible manager duties.
“ASIC doesn’t really like one manager to be in place because if they get hit by the proverbial bus, there will be a problem,” he said.
“There always has to be somebody there monitoring the licence and that can become a bit of a challenge.”
