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Accountants, you’ve reached a fork in the road – you must decide by 1 July 2016 whether to become a licensee or act as an authorised representative, or else refrain from advising on SMSFs.

Navigating this decision will depend largely on the services you provide and the value you place on your independence. In this blog, we look at the pros and cons of both paths.

Licensee or Authorised Representative?

Pros - operating as an authorised representative relieves you of the time, cost and ongoing compliance requirements associated with holding an AFS licence. It also means you won’t need to appoint a Responsible Manager to satisfy ASIC that you have the capability to provide your services.

Cons - it does have its limitations:

  • It can be difficult to find a licensee who aligns with your interests, your practice and your clients;
  • You are bound by your licensee’s approved product list in terms of the products and strategies you can recommend;
  • There are restrictions on acting within the confines of another entity’s licence such as lack of autonomy; and
  • You may lose independence and impartiality in the eyes of your clients.

Some authorised representative agreements are quite onerous and favour the licensee’s interests. Before signing a contract, seek advice to ensure you aren’t contracting away valuable business.

With this in mind, if you decide the authorised representative path is not for you, your next step is to work out what kind of licence you need.

Limited Advice Licence or Full Licence?

Pros - the Limited Advice Licence allows you to give some kinds of general and personal advice on superannuation – including SMSFs – and provide strategic advice on basic deposit products, securities, simple managed investment schemes and general and life insurance.

Cons - It doesn’t allow you to provide full financial planning advice or advice on specific financial products – except in the context of SMSFs.

If you have any concerns about any of these issues, please contact us.

Author: Jaime Lumsden

November 2014

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