Accountants – Limited AFSL for Financial Advice

Since 1st July 2016, as a result of the Future of Financial Advice (FoFA) reforms, the accountant’s exemption has been removed.  This means that accountants can no longer provide SMSF advice (or any other financial product advice) without holding an Australian Financial Services Licence (AFSL) in their own right or being an authorised representative of an AFSL holder.

Accountants and other advisers who obtain the limited AFSL can provide financial advice on SMSFs and class of product advice in relation to selected other financial products.

Accountants will be able to make recommendations in relation to a client’s existing superannuation funds to the extent needed when making a recommendation to establish an SMSF or when providing advice to clients on contribution and pensions. Accountants will also be able to assist a client to establish or wind up a SMSF.

For more information regarding the provision SMSF advice as an accountant, please view our previous article on the topic.

Types of advice you can provide

Examples of the types of advice accountants can provide under the authorisations listed above include:

  • advice on the sorts of life insurance cover (for example, life cover, total and permanent disability cover, trauma cover and income protection) that would be appropriate for a client in light of their relevant circumstances (for example, their existing level of cover) and whether they should hold the cover directly or through a superannuation fund;
  • advice on which simple managed investment scheme would be appropriate for and in the best interests of a client – for example, cash funds versus equity funds;
  • advice 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; and
  • advice on the types of basic deposit products that would be appropriate for and in the best interests of a client saving for a home deposit (for example, term deposits, online savings accounts or first home saver accounts).

Without an AFSL, accountants will be allowed to present the pros and cons of various investment strategies to client, as long as is it purely factual and not product specific. Accountants must have robust compliance policies and procedures to ensure the information does not fall within the definition of financial product advice.

Accountants seeking to obtain an AFSL will be required to satisfy the same experience requirements as anyone else when applying for a limited AFSL.

Training Requirements

Accountants will need to meet ASIC’s existing training requirements under Regulatory Guide 105 to hold an AFSL and provide financial advice. This will ensure only accountants with appropriate skills and knowledge are authorised to provide financial advice under the limited AFSL. 

Ongoing Requirements

Accountants operating within the AFSL regime (even if only a limited AFSL) are subject to all the other licensing, conduct and advice requirements to which financial advice providers are subject, including FOFA measures such as the best interests duty and membership with an External Dispute Resolution Scheme (EDRS). This ensures there is a robust regulatory framework around the provision of advice and important consumer protections are in place. It also ensures that all advice providers are operating on a level playing field.

In order to minimise the additional regulatory costs of operating within the AFSL regime, holders of the limited AFSL will be able to lodge a compliance certificate to ASIC each year.  In contrast, full AFSL holders are required to undergo an annual external audit of their financial statements and internal controls to ensure compliance with the Corporations Act. The reduced audit requirement will be available to advisers who hold a limited AFSL and do not handle any client money in connection with the provision of financial advice.

Limited AFSL holders also need to hold PI insurance which covers the provision of financial advice in accordance with Regulatory Guide 126.

The disclosure requirements contained in the Corporations Act will also apply, including the obligation to provide clients with a Financial Services Guide (FSG), a Statement of Advice (SOA) and a Fee Disclosure Statement (FDS) (where there is an ongoing fee arrangement with the client).

If you would like further information or assistance, please contact Sophie Grace directly.

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