The end of the exemption could severely restrict activities that are at the core of most accounting practices, including tax structuring and asset protection advice. The licensing option you select could have a profound impact on your relationship with your clients and the shape your business takes after 1 July 2016.
Here is a brief overview of the options, together with some of the strategic threats and opportunities they may involve.
Option 1: Stay unlicensed
Without the ability to provide a full range of structuring and asset protection advice, tax and compliance support is likely to become your core business.
Strategic threats and opportunities
This option is simple and low cost, allowing you to put existing strengths to work. Demand for tax and compliance support is also likely to remain both strong and sustained. But it does involve limiting yourself to lower value-add activities and restricting the depth of your client relationships.
This area of practice is also highly exposed to potential technology disruption from automated tax lodgement services and from low-cost online entrants, especially in tax reporting and SMSF administration. The businesses that succeed are likely to be highly efficient, cost-effective and well marketed, relying on high volumes rather than high margins.
Option 2: Apply for a limited AFSL
With a limited license, you can continue to be a trusted adviser to your clients, providing a wide range of tax structuring, asset protection and strategic investment advice.
Strategic threats and opportunities
While significantly simpler than a full licence, this option still involves some additional costs and compliance obligations, including licensee ASIC responsibilities. However, it also enables you to continue providing higher-value advice, while tapping into the potential of the fast-growing SMSF market. Nonetheless, as the worlds of accounting and financial advice continue to converge, practices with a limited licence could face increasing competition from full-service advisers.
Option 3: Apply for a full AFSL
With a full AFSL, your business will be transformed into a full-service financial advice practice.
Strategic threats and opportunities
Depending on how you choose to implement it, this option could mean re-engineering your business from the ground up. You will need to integrate a new range of financial advice services into your business, with their own processes, regulatory requirements and compliance rules. Yet you will also have the opportunity to significantly expand your practice revenue, while engaging your clients in a deeper and broader conversation about their financial wellbeing and lifestyle aspirations. By combining accounting and financial advice, you can potentially create an attractive value proposition for high-value clients, although you will face competition from established firms with proven capabilities in the advice space.
Option 4: Authorised representative of an AFSL holder
As an authorised representative, you become affiliated to a larger financial advice organisation. Depending on your agreement with the AFSL holder, you may remain largely independent, providing general strategic advice (similar to a limited licence). Or you may prefer to become a comprehensive financial advice business.
Strategic threats and opportunities
This option allows you to access many of the benefits of a licence, without the need to obtain your own. It can also give you access to a wide range of support to grow and remodel your business, such as ready-made processes and document templates for providing financial advice. You may even decide to leverage the established reputation of an existing provider by rebranding your business as the local face of a national advice chain. While that brings advantages, it also brings costs and responsibilities – although, this being said, there are providers who subsidise your investment leaving you significantly less out of pocket. You may also be limited in the scope of the advice you can provide or in the products you can recommend. You may also need to contribute a share of your revenue for marketing and compliance costs. The key is to thoroughly explore the options and select a licensee who offers the right level of support and independence for your business.
Your real deadline to decide: 1 March 2016
As you can see, the choice you make now could determine the direction of your business for years to come. But you also need to realise that time to decide is rapidly running out.
ASIC has recently highlighted that accountants need to act well in advance of June 2016 to secure a licence, publicly suggesting that applications received after 1 March 2016 are unlikely to be approved before the exemption ends on 1 July.
Peter Burgess, general manager for technical services and education, SuperConcepts
You are obviously talking to the wrong groups George. It must be hard having such a closed mind. “Product” is the last cab off the rank for quality planners. Its looking at the clients situation, working with them to sort out their goals, cashflow, tax position, developing strategies, examine any holes in their current situation and look for solutions to plug the gaps. Only then, once these foundations have been laid down is a suitable ‘product’ introduced to address the goals, strategies and holes identified.
Thanks Peter. Probably the best summary of options I have seen to date. I may be in the minority, but as the bulk of my income is from SMSF auditing and the balance from individual compliance, I cannot justify the cost, not to mention my age. I see the important underlying fact is that I make sure my clients know where I am positioned AND that I have a working relationship with a range of contacts that I can refer clients to if needed.
Thank you, Peter, for the helpful comments. I have explored the limited licence choice and the real sting is that the ASFL holder wants me to be a product seller. In each case I looked at I was expected to introduce at least 2 but preferably 4 financial planning clients PER MONTH!! I haven’t heard anyone comment about thus but there is no way on this planet that I will be a product flogger for financial planners. I realise that this could affect my practice but my professional integrity and ethics is more important.