New AFSL for accountants
On 25 June 2012, as part of the Federal Government’s Future of Financial Advice (FOFA) reforms, the Minister for Financial Services, Bill Shorten, announced a new form of simplified Australian Financial Services Licence (AFSL) for accountants which will allow them to broaden the advice they are able to provide to clients on a SMSF.
Accountants (or any advisor) currently require an AFSL if they wish to provide financial product advice on an SMSF unless it falls within the exemptions in the Income Tax Assessment Act 1936 (“Tax Act”) or Corporations Regulations 2001 (“the Regulations”).
If financial advice on an SMSF is given by a tax agent registered under the Part VIIA of the Tax Act it is not financial product advice, if it is:
- given in the ordinary course of activities of such an agent; and
- reasonably regarded as a necessary part of those activities.
Currently under the financial services regime , there is a specific list of exempt services in Corporations Regulation 7.1.29 which allows an accountant to provide specified types of advice which is not taken to constitute a ‘financial service’ such as providing advice in relation to the establishment, operation, structuring of a superannuation fund in some circumstances.
New AFSL, new changes
The proposed changes are intended to facilitate the provision of switching or consolidation advice involving a SMSF or superannutation. Under the proposed new AFSL, accountants will be able to provide more comprehensive advice on a SMSF such as making a recommendation to establish a SMSF or providing advice to a client on contributions or pensions.
Under the new limited licence an accountant will be authorised to provide advice on a “class of product”. For example, an accountant may wish to consider if they need a licence if they contemplate providing the following advice:
- advice relating to the particular assets or investment strategy of the SMSF;
- recommend that their client dispose of interests in another type of superannuation fund or any other type of financial product;
- recommend that their client cease contributing to an existing superannuation fund and instead make contributions into a SMSF;
- give advice to switch between investment options;
- recommend that their client should not invest in other types of financial product;
- advise on whether a simple managed investment scheme would be appropriate for and in the best interests of a client – for example, cash funds versus equity funds; and
- advise on whether shares are an appropriate investment option given a client’s relevant circumstances including their tolerance for risk and whether alternative classes of product might be more suitable.
Impact of changes
It is anticipated that the licensing changes will create new opportunities for accountants and financial advisers to diversify their service offering and to provide clients with more strategic and low-cost forms of financial advice.
The transition period is expected to commence on 1 July 2013 and public consultation of the draft regulations will start in the second half of this year.
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