Accountants who think they still have plenty of time to weigh up their licensing options and lock in a solution had better think again.
While the Australian Securities and Investments Commission’s new licensing regime doesn’t kick in until July 1, 2016, the regulator recently warned that licensing applications lodged after March 1 probably won’t be assessed before the deadline.
That leaves accountants only four months to consider all their options and finalise a solution that will allow them to continue doing what they’ve always done. In reality, it’s probably closer to three months taking into account the Christmas and New Year holiday period which is smack bang in the middle.
It sounds dramatic but it doesn’t have to be.
Only accountants who plan on applying for a full or limited AFSL are affected by ASIC’s forward deadline.
As it stands, only 160 limited licence applications have been lodged with ASIC of which 70 have been granted. Around 90 applications have been rejected or withdrawn which suggests that applicants have either failed to supply sufficient information or failed to meet the regulator’s onerous licensing requirements.
For the majority of accountants who don’t have the time, ability or desire to run their own mini-AFSL, the most appropriate option is to become an authorised representative of an existing independently-owned dealer group.
Those who already know this is the right option for them should start making their move now.
Although it may only take a few weeks for a dealer group to conduct due diligence on a candidate, determine if they’re good cultural fit, complete the paperwork and go through the on-boarding process, things may get held up if an accountant needs to gain additional qualifications.
Formalities may also get held up if licensees experience a rush of applications at the same time.
The real cost, and opportunity cost, of licensing
As with the introduction of any new regime or offer, there will be a number of people who fail to act in time. Those who choose to do nothing and find they’re unable to continue legally providing basic self-managed superannuation fund and class of product advice run the risk of becoming obsolete over time.
Accountants who say it’s all too hard and opt out of advice completely must do so knowing that the growth potential of their business will be significantly impeded and it may cease to be relevant in the next five years.
The tragedy is that this scenario could’ve easily been avoided with a little effort and minimal spend.
Gaining a limited authority from an existing licensee is nothing like gaining a limited licence from ASIC.
Accounting firms which hold their own licence effectively run a mini-dealer group. They must appoint a responsible manager, establish a compliance framework and audit program, and obtain PI insurance. It’s a major, and often expensive, exercise with disproportionate pay-off when compared to obtaining a limited authority.
By partnering with a well-resourced, independently-owned dealer group with experience running a licence, accountants can leverage the infrastructure, expertise and scale of a highly-skilled third party.
A conservative estimate of the cost of applying for an AFSL is around $7,000 with ongoing costs of over $6,000 per annum. For firms with multiple authorised representatives, the cost may be much higher.
Comparatively, accountants can gain a limited authority from a reputable, independently-owned licensee, and get all the licensing services they want and need, for around $5,000 per annum with no upfront application fees and only $1,000 per additional authorised representative, per annum. It’s hard to argue with those numbers.
While it’s true that the majority of accountants still have eight months left before the new licensing regime, let’s not forget accountants were first told about the removal of the accountant’s exemption in mid-2012. Accountants have had over three years to get over the initial shock and frustration and put a plan in place.
Limited licence applications have been open for over two years. As we get to the pointy end of the timetable, accountants have no time to waste.
Greg Holman (FCPA) formed Holman’s Accounting Group in Noosa 21 years ago. His firm was listed by BRW as one of the top 100 accounting firms in Australia by revenue and one of the top 10 fastest growing. In the late 1990s, Greg was joined by Rob McGregor and together they established an award-winning financial planning business. In 2012 they sold their accounting firm and launched GPS Wealth Ltd – an AFSL designed for accounting firms looking to embrace financial services as a key service offering. GPS Wealth was recently named Dealer Group of the Year by AccountantsDaily's sister publication ifa. It is also the 2015 CoreData Licensee of the Year.