Business News

Threefold warning for accountants

Three significant bodies operating in the SMSF space have issued a warning to accountants wanting to provide advice under a limited Australian financial services licence (AFSL) in the new Future of Financial Advice (FOFA) environment to start the process immediately.

The new regulations dictate accountants who are providing or intending to provide financial advice to clients, in particular SMSF advice, need to do so as an authorised representative of an existing AFSL holder or apply for a licence themselves after 1 July 2016.

The Australian Securities and Investments Commission (ASIC) was the first to release a statement on the subject in response to the low number of licences it had granted to date.

The corporate regulator revealed it had only received 160 applications for a limited AFSL from accountants, with only 70 being successful.

“Accountants should ensure they’ve allowed enough time to properly prepare an application and to undertake any relevant training,” ASIC deputy chair Peter Kell said.

“Where an application is in good order, ASIC can assess the application within four weeks, but if further details are required because the information provided is insufficient, this will take longer.”

In addition to the call for action, ASIC alerted accountants to the capacity constraints that would become a factor closer to the 30 June 2016 deadline, urging accountants to submit their limited AFSL applications by 1 March next year.
It also made it clear there would be no deadline extension for practitioners who failed to act in time.

“There has been adequate time to apply for these licences. After 30 June 2016 any accountant found to be providing unlicensed advice risks regulatory action,” Kell said.

“Providing unlicensed financial services is a criminal offence.

“Our message to accountants is clear: don’t be complacent, you need to act now.”

To assist accountants, ASIC has published “INFO Sheet 179 Applying for a limited AFS licence”, covering off some of the more frequently asked questions about the process, such as not needing to engage the services of a professional firm to assist with an application.

The Institute of Public Accountants (IPA) reinforced the message from ASIC, again urging practitioners to send in their applications as soon as possible.

“The IPA has constantly advised accountants that they should consider their future business models in light of Future of Financial Advice reforms,” IPA chief executive Andrew Conway said.

“Accountants must comply with the regulator’s requirements to continue to provide SMSF advice or they will run the risk of facing criminal charges.

“Public accountants hold the prestigious mantle of trusted adviser and are in the best position to capitalise on the new financial services regime, so we are hopeful of a greater and quicker response to the regulator’s requirements.”

The SMSF Association (SMSFA) repeated the message, emphasising accountants needed to assess the situation in a business context as well as from a compliance perspective.

“From July 1, giving advice on setting or winding up an SMSF will be no different to advising on contributions, LRBAs (limited recourse borrowing arrangements), pensions or TTRs (transition-to-retirement strategies) – if it gets into financial planning territory, you will need a full or limited licence,” SMSFA head of education services Liz Ward and Licensing for Accountants chief executive Kath Bowler said.

“If you aren’t licensed, there is every possibility you will hold your business back, as well as potentially losing financial planning and superannuation revenue and clients to practitioners who are licensed.”

Further, they advised accountants not to rely on the deadline being extended.

“It’s worth remembering there was no extension granted to financial planners when their licensing regime was introduced,” Ward said.

“I suspect the official attitude will be that accountants have been given ample time to prepare and it’s hard to argue with that.”

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