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If you’re an accountant operating in the self-managed super space and you are confused about financial services licensing, you're not alone
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Resolve your licensing decision in 3 easy steps
14 April 2015
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12 minute read
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You’ve no doubt been bombarded with phone calls, emails and seminar invitations from companies offering a range of licensing solutions and referral opportunities.
It’s baffling trying to navigate your way through this maze, so I’ve simplified the process into three simple steps:
Step 1 – Do you need licensing?
Many accountants fall into the trap of thinking that licensing is all about product advice. Licensing is much broader than that. If you want to talk to your clients about strategies such as transition to retirement, contributions to superannuation, re-contribution strategies, advising who should be members of an SMSF, then you will probably need to be licensed. Use the following three questions to guide your licensing decision.
1. Do you want to be pro-active or reactive with clients? Do you simply want to respond to the questions your clients are asking you, or are you actually wanting to ask questions of your clients and initiate contact to advise them of opportunities, such as Transition to Retirement (TTR) strategies?
2. Do you want to probe clients for more information and provide alternative suggestions or just respond to compliance-based questions?
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3. Do you want to take more than just tax into account? If so, licensing is essential. Look at a TTR strategy for example. If you are only advising your clients about how a TTR can save them tax, but with the same take home pay, you probably won’t require licensing. But if you want to assist your clients to achieve their retirement goals, and how a TTR can be used to help achieve this, then you will require licensing as tax won’t be the only consideration.
A major factor contributing to the confusion facing accountants who do decide they need licensing is that there isn’t one standard licensing solution. So it’s no wonder you are being told different things from different sources. To make sure you are in the driver’s seat when it comes to your licensing decision, you need to work out exactly what you want to be licensed for. You need to go through an exercise and think of all the activities and services you want to provide clients, and whether those activities require licensing or not. You can then make sure that any licensing option you are looking at (in Step 3) allows you to do those things.
Step 2 – What initial education do you need?
Once you’ve gone through the previous two steps, you are now ready to start your initial education, or RG146 training as it is often referred to. This training is directly linked to the advice you want to provide, so unless you’ve gone through that exercise (see Step 1), it will be difficult to work out your training needs.
For example, basic licensing solutions may only require one or two units. But in my experience, many accountants want to provide a broad range of strategic advice to their SMSF clients, including rollover advice into the SMSF and assistance with investment strategies. In this instance, you’re normally looking at 3-4 units of study.
Step 3 – Should you self-licence or become an authorised representative?
It’s only after you’ve completed the three previous steps that you need to worry about how you will become licensed and whether the best option is to obtain your own licence or not. There are pros and cons with both options. Things that should be guiding your decision here are:
• How much control you want over the advice process.
• What options your clients will have for specific investment advice.
• How much time and effort you are willing to invest in meeting your licensing obligations, in addition to your advice obligations.
Accountants will need get moving with their licensing decision now so they have enough time to complete any initial training by July 2016. Every practice is unique and although the decision seems confusing, chunk it into small steps and first examine the needs of your clients and business. Then follow my 3-step process and you’ll have a much clearer picture!
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