AMP's SMSF Advice has debunked the commonly held view that for a typical accounting practice, the cost of establishing and maintaining a limited Australian Financial Services Licence (AFSL) is less expensive than becoming an authorised representative of another AFSL holder.

Accountants can expect to pay from $20,000 to $34,000 for self licensing, compared to $15,000 to $20,000 for becoming an authorised representative, according to AMP SMSF Advice research conducted as accountants consider their licensing options.

Most accountants view the $1,485 ASIC application fee as their only up-front licensing cost, but in reality, licensing set up can cost accountants about $11,500, more than eight times what most accountants expect.

Many accountants are unaware they should begin business preparations at least a year in advance if they're planning on acting under a limited licence when the accountant's exemption is removed.

These are some of the insights AMP's SMSF Advice has unearthed after speaking with more than 500 accountants over the past year.

SMSF Advice has unlocked six key insights into what accountants are thinking - and not thinking about - when it comes to licensing. SMSF Advice's special report, To licence or not: The real cost of your decisions, explores the big questions facing Australian accounting professionals.

From 1 July 2016 the exemption which allows accountants to set up an SMSF without the need for a licence will be removed and accountants who want to continue doing this will need to be licensed.

Accountants have a number of licensing options, including obtaining and maintaining their own licence or becoming an authorised representative of another AFSL holder.

AMP's Head of SMSF Advice Stuart Abley said it's crucial for accountants to have an accurate understanding of the licensing options available and the implications of each.

"After speaking with over 500 accountants about licensing we know that the big areas of confusion for accountants are around cost and timing," Mr Abley said.

"The question of licensing for accountants is about how, and not when - the time to act is now.

"Getting ready for licensing is a lot more involved than most accountants anticipate with preparations estimated to take well over a year, including training to meet RG146 competency requirements, collection of documentation, creating compliance procedures, understanding FOFA advice obligations and the opportunity to develop a new pricing structure.

"The choice between becoming self-licensed or an authorised representative of a licensee is an important decision and while most accountants are concerned with the cost implications of change, some are limiting their focus to costs only.

"This is a terrific opportunity for accountants to transform their business by embracing advice and benefiting from the value it can add to their practice with increased revenue and profitability and, most importantly, the opportunity to offer clients a valued service.

"The Australian SMSF asset pool is worth $530 billion and accountants who want to continue to service their clients with SMSF advice, or build strength in this growing sector, have some big decisions to make about the best way forward for their business," Mr Abley said.

SMSF Advice spoke with over 500 accountants across Australia over the past year and landed on six key insights about accountants and their licensing journey:

  • Not all licensing costs are being considered. In the first year, total up-front and ongoing management costs of holding a licence could be as high as $20,000 to $34,000, compared to costs of around $15,000 to $20,000 for becoming an authorised representative of another AFSL holder.
  • Accountants need to look beyond financial costs and consider the non-financial, ongoing costs, including maintenance of the licence. This maintenance work is often carried out by the practice partner, the highest fee earning staff member. Accountants also need to consider their ability to absorb the risk into their business model associated with becoming self-licensed.
  • The type and scope of SMSF advice accountants can give under the licensing options vary. In choosing which licensing option to take, accountants need to be very clear on the type and scope of SMSF and other financial advice they want to provide to ensure they meet all legal and compliance obligations.
  • Accountants are unsure about how to incorporate 'advice' into their business structure. More than half of accountants are not charging appropriately for the strategic advice they give to clients, pricing it at the same level as a client's general tax advice, rather than at a more strategic advice level.
  • Many accountants are concerned they may be providing advice beyond the SMSF accounting exemption.
  • If accountants want to obtain a limited licence and begin offering advice by July 2016, they need to be taking active steps during 2014. Most accountants are unaware that if they are planning to act under a limited licence, they should begin preparing their business at least a year in advance, including undertaking the RG146 training, time for collecting and collating licensing documents and business preparation.

My Abley said the most important question accountants should be asking themselves is, "How do I transform my accounting business now so it remains relevant in the future", and licensing is an important first step in this opportunity to focus on future growth.


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