Myth busting with SMSF licensing costs
The inaccurate figures circulating within the SMSF industry on licensing costs for accountants are causing confusion and leaving many accountants overwhelmed by the decision process.
As the deadline for the removal of the accountants’ exemption for SMSF advice nears, accountants could be excused for being increasingly confused on what path to take.
While licensing is a new cost to bear and it does require some initial time and effort, many of the figures bandied around the industry about the cost are simply not accurate.
If you’re still weighing up your options and are unsure of how to tackle this issue, I’d urge you not to panic.
Yes, you need to get a move on, but it’s important you take the time to really consider the best choice for you.
The real cost of licensing
The 30 June 2016 deadline for the removal of the SMSF exemption is fast approaching, and as time ticks by, many accountants are starting to panic about their next steps. This isn’t helped by some inaccurate commentary, claiming the upfront and ongoing costs of licensing are upwards of $100,000.
The reality is that setting up an Australian Financial Services Licence should only cost you as little as 10 per cent of that figure. And while this is still an additional cost, it’s one that many accountants should be able to bear – and one that brings with it significant opportunity.
I’d also point out that ongoing AFSL compliance requirements and the time required to maintain a licence are very similar to those involved in maintaining an authorised representative model. Plus the monthly fee you will pay your licensee will likely be similar to the ongoing costs of an AFSL.
Retain your independence
Based on some of the research Perpetual has undertaken on accountants, and their views on the changes to SMSF advice, we have found there is a strong desire among accountants to retain independence. In fact, when it comes to making a licensing decision, a recent survey of Perpetual’s accounting networks found 84 per cent of accountants feel that retaining independence is of "critical importance".
Accountants enjoy one of the strongest relationships with clients of any profession – a position they have well and truly earned. If this is important to you, you must consider how any potential path forward, post the SMSF exemption, will impact your independence and ability to give genuine, independent advice.
Becoming an authorised representative has implications that can jeopardise your independence, with many licensees receiving some form of commission from legacy products. If that is the case, as an authorised representative of that licensee you will no longer be able to call yourself independent. In contrast, obtaining your own licence can offer you the chance to retain your independence, as well as greater choice and control.
Understand your options
There is no one best licensing option for accountants. What’s right for one accountant will be different for another. But, if you’re still undecided on your approach to the licensing changes, then I’d urge you first and foremost to inform yourself of your options. And if you haven’t made a move as yet, I’d urge you to, at the very least, turn your mind to RG146 at a very minimum.
With SMSFs having become a significant driver of diversified revenue for accounting practices, a great opportunity remains for accountants to continue to capitalise on their well-earned reputation as a trusted adviser and service this sector.
By Dermot Lindsay, national manager, Alliance Partners, Perpetual Private