With the accounting world in the midst of change, the Institute of Public Accountants (IPA) is hopeful new regulations will benefit consumers.
Recent changes to the Corporations Regulations 2001 see the removal of the current accountants' exemption, which allows accountants to provide financial advice on SMSFs without an Australian Financial Services Licence (AFSL), on 1 July 2016. The amendments also provide alternative licensing arrangements from 1 July 2013.
This provides a three-year transitional period, enabling accountants to utilise the existing exemption to transition to the new regime. This forms part of ASIC’s plan to streamline the process.
Accountants who are members of one of the three professional accounting bodies, who apply for an AFSL between 1 July 2013 and 30 June 2016 and who only provide particular advice services do not need to demonstrate that they possess the experience required for the purposes of the organisation competence requirement.
However, licensees who receive an AFSL under this streamlined process must within three years of being granted a licence be able to demonstrate (if requested to do so) to ASIC that they have the requisite knowledge and the competence to provide the financial services covered by their licence.
The IPAhas been actively involved in the extensive consultation over the Future of Financial Advice reforms and is generally supportive of the policy intent, particularly in the area of consumer protection.
However, the IPA is still wary of a number of factors, including how the scope of advice will be interpreted and how enforcement action to follow will be implemented. More clarity and certainty around these matters is required.
Exactly how streamlined this process will be will most likely depend on how well ASIC resources the process. The IPA advises that if its members can't get through the process quickly and efficiently within a few days and with a minimum of paperwork, then it won't be considered a success.
ASIC’s ability to resource the transition will be a major factor in the success of the new regime’s emergence. It is considered that most applying for either a limited licence or seeking to become an authorised representative (AR) of a licensee are likely to so within the first or last six months of the start of the transition period.
Regardless of the transitional period, from 1 July 2016, accountants wanting to provide financial advice relating to SMSFs will need to hold an AFSL or be an AR of an AFSL holder.
Limited AFSL holders will be able to provide advice on:
• SMSFs as a product – ie personal or general advice
• Superannuation at the class or product level
• Securities at the class of product level
• Simple managed investment schemes as defined in the Corporations Regulations
• General and life insurance at the class or product level
• Basic deposit products
Of course, there are many other considerations to be made before opting for a limited licence or becoming an AR of an existing AFSL holder.
The cost of a licence attracts an application fee and there is in most instances a need for increased professional indemnity insurance. Licence holders will require membership of an external dispute resolution scheme and there will be the cost of ongoing training and education.
It should also be noted that the option of a limited licence is open to anyone, not just accountants. A new world of competition is opening in the financial services arena and as intended, it is believed that consumers will benefit from greater access to a more affordable, competitive service.
The IPA continues to encourage members, particularly those seeking to grow their business in the financial services space, to get on board now.
It will be interesting to see how the relationship between accountants and planners plays out. It is generally considered that there are likely to be more blended practices and more referrals and working together in the interests of clients, as intended. The IPA thinks this will happen and we are encouraging members in this direction.
Recent friction between accountants and planners had emerged due to an unlevel playing field in meeting compliance standards and the delay to the proposed Tax Agent Services Act (TASA) reforms. The IPA fundamentally believes that anyone providing tax advice should do so to the same professional and ethical standards.
However, the organisation remains positive that common sense will prevail in the best interests of clients and that both accountants and planners will work together to provide a greater level of accessible and affordable financial services for the community.
All in all, the accountant’s world and that of financial services is changing forever and we are all hopeful for the benefit of the Australian consumer.
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