This is the second blog of the series which demystifies the changes that will result from the end of the accountants' "SMSF recommendation" exemption by explaining what licence you will need. Read the first blog here.
If you are an unlicensed accountant who recommends the establishment or wind-up of SMSFs and plans to continue doing so after 30 June 2016, you will need a limited or full AFSL. Here we will consider limited AFSLs.
The limited AFSL also allows you to broaden your advice-giving authority. In addition to continuing your existing SMSF establishment and wind-up advice and dealing practices, you can apply for new "class of product" authorisations. A limited AFSL will enable you to provide class of product advice about securities, superannuation, general or life risk insurance, simple managed investment schemes, and basic deposit products.
Treasury provides the following examples of advice you can provide under a limited AFSL:
- advice on the sorts of life insurance cover (for example, life cover, total and permanent disability cover, trauma cover and income protection) that would be appropriate for a client in light of their relevant circumstances (for example, their existing level of cover) and whether they should hold the cover directly or through a superannuation fund;
- advice on which simple managed investment scheme would be appropriate for and in the best interests of a client – for example, cash funds versus equity funds;
- advice on whether shares are an appropriate investment option given a client's relevant circumstances including their tolerance for risk and whether alternative classes of product might be more suitable; and
- advice on the types of basic deposit products that would be appropriate for and in the best interests of a client saving for a home deposit (for example, term deposits, online savings accounts or first home saver accounts).
You can also continue to provide some advice about direct real property (because this is not a financial product) and taxation advice (if you are a registered tax agent).
Deadline – 30 June 2016
If you decide to apply for a limited AFSL, you need to be aware of the transition deadline. If you have not submitted your application by this date, you must stop providing any financial services until your application is approved. Given the large number of applications that we expect to see in 2016, we recommend that accountants apply for a limited AFSL in the second half of 2015.
ASIC has also outlined some transitional provisions that will assist accountants to obtain AFSLs. All licensees need Responsible Managers (RMs) to prove to ASIC that the business has the competence to provide the financial services. ASIC's RG 105 sets out that, at a minimum, to be nominated as an RM you will need to have at least 3 years' regulated experience over the last 5 years in the specific financial services you wish to provide, as well as certain qualifications. This can be a hurdle – even for highly experienced advisers. But, as part of the limited AFSL transition provisions, ASIC has relaxed this requirement. If you apply for a limited AFSL and your RMs are accountants who hold practising certificates, then they will not need to meet any additional experience requirements.
Applying for a limited AFSL
The process of getting a limited AFSL is very similar to getting a full AFSL – see below for details.
The main difference is that recognised accountants don't need to submit a phone-book sized summary of relevant experience. Instead, they just need to provide evidence of their accounting qualifications. Beware! If you don't apply for a limited AFSL by the 30 June 2016 deadline, you will not be able to rely on this exemption and you may find that your proposed RMs are rejected by ASIC entirely.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.