Accountants operating without a full or limited Australian financial services licence (AFSL) must ensure their position is visibly disclosed across all business and client materials and documents, and divulge any commissions or fees from referral relationships, an industry lawyer has warned.
“In order to do [execution-only] properly without a licence, there is a process you need to work through,” DBA Lawyers director Dan Butler said during a recent DBA SMSF online update.
“You want to make sure you’ve got your disclaimer out to your clients, you want to make sure your clients are very aware that you don’t hold a licence and that you’re not intending to influence their judgment at all, but you’re willing to do the admin, tax advice, factual information and that you’ll go out of your way to refer them on to a financial planner to get a statement of advice.
“Make sure you are clear in communicating that.”
Butler said transparency needed to be extended into all aspects of the business.
“If you decide there is no licence, be right upfront about that in your disclaimers at the end of your client letters,” he said.
“[State] that you do not have a licence and if they want financial product advice they will be referred to a person who is registered under the Corporations Act who holds an AFSL.
“Your website should be updated, your engagement letters – everything going to clients should be reminding them that you do not have a licence.”
When it came to referral relationships, non-AFSL accountants must also be transparent about any resulting fees that were passed back to them, he noted.
“You need to be upfront about the referral relationship, you need to disclaim that you don’t have a licence and that you’re just referring them on and [disclaim] you’re not getting any kickbacks or commissions out of that referral relationship,” he said.
“Or if you are, you need to let the client know and get them to approve it before going ahead.
“Also be aware that if it is a related entity that you are also indicating that there could be, for instance, fees coming back to you because it’s a related financial planning practice, who use you as a related accounting practice.
“It’s best that you’re upfront and you need to be aware of what your disclosure requirement of that fee may be.”
Non-AFSL holders were still able to provide factual advice, tax advice, traditional accounting services – preparing financial statements, auditing or valuing a business – as well as broad asset allocation advice and advice that did not involve a financial service, often referred to as execution-only services, he added.
“There’s still a lot accountants can do without a licence,” he said.
“As an accountant, you need to work out what best suits your business, your costs, your time and what steps are involved.”