Before choosing the right licensing model for your firm, think carefully about the pros and cons of each option.
Choosing whether to operate under their own AFSL or become an Authorised Representative of an existing licensee isn’t a decision accounting firms should make lightly. But with ASIC’s 1 March deadline for limited AFSL applications fast approaching, it’s one that many accountants will need to make soon.
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So which option should you choose? It all boils down to figuring out which one will best serve your clients’ needs and ensure the sustainability of your business.
Going it alone
For accounting firms that aren’t looking to expand their SMSF advisory business, or whose clients only need basic SMSF advice, applying for a limited ASFL might be the most suitable option. But, as its name suggests, this type of licence limits the extent of the advice you can provide. Later down the track, you may find that it restricts your firm’s growth — and you could lose clients to firms that are able to offer a more complete advisory service.
Other firms may also consider applying for a full AFSL, but managing the ongoing obligations that come with self-licensing can be time-consuming and costly. These involve keeping up to date with regulatory changes, maintaining advice-specific professional indemnity insurance, and training and supervising Responsible Managers in line with ASIC’s requirements.
This option is therefore most likely to suit mature companies with excellent systems and processes in place, and the right core competencies in areas like change management and compliance.
But if your firm lacks the necessary experience and expertise, self-licensing could end up being more trouble than it’s worth. It could also mean you ending up with less time to spend doing what you do best — helping your clients.
Joining a licensee
Becoming an Authorised Representative of an existing licensee can be a cost-effective way to enjoy all the benefits that come with having your own AFSL — but without the expense, training and extra work.
According to Tyson Flower, Partner with Gold Group Consulting, his firm decided to add an advisory arm to their practice so they could offer their SMSF clients more than fund administration and auditing.
Flower said: “We went down the financial advice path because many of our clients were asking questions that we couldn’t legally answer without an AFSL. But after careful consideration, we decided that getting our own AFSL was too complicated and costly, and the ongoing management of it wasn’t within our core skill set. We also didn’t feel that it would necessarily benefit our clients.”
Gold Group Consulting thought carefully about which licensee would be the best fit for them. In the end they chose a licensee with specialised experience in helping accounting firms expand their service offering through financial advice.
“We see ourselves as accountants first, but who can also provide integrated financial advice,” Flower explained. “We chose a licensee who we knew understands how we think — and one that we felt could best support our goals.”
Part of the team
Some firms may be wary of joining an existing licensee because they believe it could limit their independence and dilute their professional identity. But according to Flower, rather than being restrictive, the arrangement offers many advantages. These include access to an extensive range of approved products, guidance from a dedicated Practice Development Manager, and the expertise of research, technical and compliance specialists.
But what Flower and his colleagues hadn’t expected was the level of peer support available. As part of their induction process, they were introduced to other firms in their local area that they’d previously viewed as competition. To their surprise, these firms were ready and willing to offer advice that would help them on their advisory journey.
“In the past, we believed we needed to protect our client base from other firms,” Flower admitted. “But connecting with accountants within our licensee is all about helping each other. We didn’t expect it to be like this — and it’s fantastic.”
Putting your clients first
When it comes to making your licensing decision, you and your team should carefully consider your clients’ current and future needs. That way you’ll be able to choose the licensing solution that will offer them the most value.