From 1 July 2013, accountants, other advisers, companies and partnerships can apply for a limited financial services licence that will allow them, their employees and representatives to provide advice in a range of situations when dealing with self-managed superannuation funds (SMSFs), without holding a ‘full’ AFSL.

From 1 July 2016 this limited licence will replace the accountants’ exemption (regulation 7.1.29A of the Corporations Regulations 2001), as a more restricted licence alternative to a full AFSL. This means by 1 July 2016 advisers to SMSFs will have to consider whether they must be a licensee or an authorised representative of a licensee.

Who do the amendments affect?

Anyone who provides ‘financial product advice’ will need to have a licence or be a representative of a licensee. As ‘financial product advice’ is widely defined, anyone who provides services or advice in the following areas will generally need to have a licence or be a representative of a licensee:

  • establishing, operating and winding down a SMSF
  • investment strategies for SMSFs
  • contributions and pensions
  • rollovers, switching and consolidation
  • insurance - what kind, how much and whether it is held in or out of super.

What services can a licensee provide?

Essentially, licensees with a limited licence and their representatives will be able to provide strategic, high level advice in relation to various financial products. They can provide advice on all of the above services including superannuation, insurance and basic deposit products, securities, contributions and pensions, switching or consolidation and investing in simple managed investment schemes such as liquid cash management trusts or equity funds.

The key requirement is that the licensee only provides ‘class of product’ or ‘non product’ advice. This means that the licensee can provide advice about a class of products but cannot make a specific recommendation about a particular product.

For example, the licensee or representative can give a general recommendation about term deposit products but cannot specifically recommend that the person deposit their money into a particular term deposit offered by a particular bank or building society.

What are the requirements to apply for the limited licence?

Anyone can apply for the licence. To be granted the licence, the applicant must meet training, compliance and professional indemnity insurance requirements as detailed by ASIC and must be a member of an external dispute resolution scheme.

Accountants should not assume that their existing professional indemnity insurance will be sufficient for the new licence, as many policies exclude a number of the services that can be provided under the licence.

Are there any transitional measures?

‘Recognised accountants’ who apply between 1 July 2013 and 30 June 2016 do not have to satisfy the experience component normally required when applying for the limited AFSL.

A ‘recognised accountant’ is a person who holds a certificate of public practice issued by the Institute of Chartered Accountants in Australia, CPA Australia Limited or the Institute of Public Accountants.

These accountants must complete a knowledge update review within three years from being granted the licence to demonstrate to ASIC that they have the required skills to continue to hold the licence.

From 1 July 2016 all entities who apply for the licence will have to satisfy the full experience requirements of an AFSL.

What are the ongoing obligations of the licensee?

Licensees must lodge an annual compliance certificate (unless they handle any client money and are therefore required to lodge an annual audit report).

Licensees will also be subject to the consumer protection provisions including the best interests duty introduced under the FOFA reforms and requirements such as complying with all financial services laws, maintaining the competence of employees and ensuring they are adequately trained, having dispute resolution mechanisms in place, adequate compensation arrangements for retail clients and adequately managing any conflicts of interest that arise.

Where can I get further information on this?

For further information, refer to the ASIC website, the Future of Financial Advice website.