Accordingly, from 1 July 2016, three options are available to accountants who currently provide advice or assistance to clients on SMSF related matters. They are:
Hold an AFSL (whether a full AFSL or limited AFSL)
The upfront and ongoing cost and compliance burden of holding an AFSL may be cost prohibitive, especially for small operators. An AFSL application must contain all of the compliance and operational policies that ASIC requires to make a decision on whether the accountant (or accountant firm) is competent and has the necessary skills and expertise to provide financial services on an ongoing basis. Ongoing compliance obligations apply.
The accountant will also be required to satisfy the best interests obligations and ensure advice is documented in a compliant manner. There are a number of other lodgement and notification obligations that an AFSL holder is required to comply with (i.e. such as submitting financial reports with ASIC).
While a limited AFSL has less onerous lodgement obligations (a compliance certificate, and not audited reports, are required to be lodged with ASIC), the type of advice authorised by a limited licence is restricted to “class of product” advice only and so may not provide the flexibility the accountant requires in advising its clients.
Become an authorised representative of an AFSL holder
Instead of obtaining an AFSL, accountants may wish to become authorised representatives of an AFSL holder. Provided the AFSL has the appropriate authorisations, this will allow the accountant to continue to advise clients on SMSF related matters. Authorised representatives will be required to satisfy knowledge and skill requirements before providing advice to clients but can usually rely on compliance policies and procedures issued by the licensee rather than maintaining their own.
The scope of authorisations of the AFSL, terms of the authorised representative agreement and overall licensee offering are key issues accountants should consider in determining the feasibility of this option.
The annual fee that is payable to the AFSL holder is obviously a relevant factor, although as a general rule, the level of fees payable may correlate to the level of overall support provided by the licensee (such as compliance, training, para-planning, software and technical support). In this regard, accountants should consider how a low cost offering may affect their resource allocation and overall risk profile.
Cease providing SMSF advice to clients and think about referral arrangements
This will obviously have ramifications on the accountants’ relationship with clients and care should be taken in exploring referral arrangements to ensure they are compliant.
Regardless of which option is selected, significant preparation time is required and so accountants should make a decision now if they haven’t already.
If you would like to discuss these options or need advice, please do not hesitate to contact us.