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Touted as the next frontier for accountants, Limited Australian Financial Service Licences (AFSLs) are starting to gain traction with planners too. But what makes them so appealing, ask Paul Derham and Megan Jaksa.
The end date for the accountants' exemption is set for 30 June 2016. After that, accountants recommending self-managed superannuation funds (SMSFs) will need an Australian Financial Services Licence (AFSL).
Recently, we ran a seminar titled "Full AFSL vs Limited AFSL for Accountants", and were surprised by the attendance. We expected a majority of unlicensed accountants.
However, all of the sell-out crowd were already fully licensed. Some were Corporate Authorised Representatives and others were self-licensed financial planning practices.
So, what was their primary motivation in understanding limited AFSLs?
Two words: Securing referrals.
Background
Let's go to 2010 for some history. As a result of excellent lobbying from the accounting bodies, Corporations Regulation 7.1.29A was inserted into the Corporations Regulations 2001 which allowed recognised accountants to recommend the acquisition or disposal of an SMSF.
Since then, the non-licensed body of accountants have been active in recommending the setup of SMSFs, often then referring the preparation of the SMSF investment plan and other strategic matters to licensed financial planners.
Until now.
We are currently in a transition phase, where recognised accountants - members of one of the three professional accounting bodies who meet certain requirements including holding a Public Practice Certificate - can apply for a "limited" AFSL to continue their SMSF recommendation activities post-30 June 2016.
It's described as "limited" but is a huge expansion on what could be done under the accountants' exemption.
Strategic, but not specific
The limited AFSL is so good that some full AFSL holders have actually downgraded their authorisations from a full AFSL to a limited AFSL.
Why? Well, in addition to recommending the establishment or disposal of an SMSF (and commenting directly on the client's existing superannuation products), the limited AFSL holder can provide strategic advice.
Strategic advice, but not specific advice. Accountants can provide "class of product" advice that goes well beyond the old portfolio allocation exemption contained in 7.1.33A of the Regulations, (which, interestingly, will survive the removal of the accountants' exemption).
The portfolio allocation exemption says that recommending allocation of a person's funds across...