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THE DANGERS OF BEING AN AR.

The dangers of being an AR

With accountants needing to be licensed by 30 June 2016, it might be tempting to think becoming an authorised representative of another licensee is a quick, easy and cheap solution.

While this may suit some accountants, it can be fraught with traps for the unwary – especially if you’re pursuing a full advice model. 

Here are some important issues to consider:

  • Level of support – Accountants providing limited advice may find the authorised representative model appealing to reduce compliance work – but this is not always the case. Support provided by licensees can range from non-existent to oppressive. Under the former type, you need to source and implement your own policies and procedures for compliance with AFS obligations, while representatives of the latter may drown in often unnecessary compliance, which can get in the way of business;
  • Approved Product Lists (APL) – there may be limits on the products you can recommend. This is at least partly due to PI insurers who generally won’t insure if there is no APL, or may not insure for non-APL product recommendations. With institutional licensees, you may find that you’re ‘encouraged’ to sell in-house products. This might not suit accountants who are committed to providing quality independent advice to clients;
  • Authorised Representative Agreements – watch out for one-sided AR agreements that impose onerous obligations, require you to provide broad indemnities or give ownership of your client portfolio to the licensee. For more information, see our blog The Snakes and Ladders of AR Agreements. 

Whether you want to provide limited advice, or a full service advice, make sure you find a licensee who is a good fit before committing to a relationship.

But do decide soon – because preparation for licensing takes longer than the application itself. Rushing it, or applying before you’re fully prepared increases the risk of a poor-quality application and rejection by ASIC.

Click here for all the resources you need to help you decide which licence you require and apply for your Limited AFS licence.

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

Author: Jaime Lumsden

Related Blogs: Accountant’s Licensing – A Guide to Help You Choose, Limited Licence: Apply Early

December 2015

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