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Numbers will drop into double digits this year, according to Adviser Ratings.
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Limited licence advisers ‘an endangered species’
11 April 2023
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10 minute read
Limited licence advisers — mostly accountants — now number fewer than 200 and will drop to double digits this year, according to website Adviser Ratings.
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The rapid decline takes the number down from 1,000 just a few years ago and comes in the wake of changes to the rules in July 2016.
Prior to that date, accountants could give limited advice about SMSFs without an AFS licence, but the changes made a licence mandatory for all advice broader than that permitted by exemptions in the Corporations Act.
A limited licence allowed an accountant to provide narrowly defined financial product advice, often in relation to self-managed super funds.
Superannuation leader at CA ANZ, Tony Negline, said accountants found that they had been using the limited licence less than expected and baulked at the costs involved.
“If you’re not really using it, you’ve got increased cost of PI (professional indemnity) insurance, operational costs, and so on,” he told Accountants Daily sister brand ifa.
“If you’re not using the license, I think people are turning around and saying, ‘why am I paying all this?’”
These issues were brought to the attention of the Quality of Advice Review lead, Michelle Levy, who in her final report said there did “not appear to be much merit in holding a limited AFS licence”.
“Limited AFS licence-holders are still required to meet all of the relevant obligations that attach to a licensee, including complying with the general obligations of an AFS licensee, holding professional indemnity insurance, being a member of the AFCA and paying the ASIC levy and so, the benefits of a limited licence seem, well, limited,” Ms Levy wrote.
“It is then unsurprising that few accountants or other tax agents have taken up the opportunity to hold a limited AFS licence.”
Ms Levy also pointed to suggestions from accounting and SMSF groups that they should be able to provide advice more broadly about their clients’ superannuation needs without an AFS licence, limited or otherwise, and without being a representative of an AFS licensee.
“Advice on superannuation products, including interests in SMSFs, is financial product advice. And it should be regulated as financial product advice. I do not see any reason for making an exception,” Ms Levy said.
“This will ensure that consumers who receive this advice will do so with the same protections as all other recipients of financial product advice, including that the advice is good advice (if it is personal advice), the requirement for advice providers to act in their best interests (if a fee is charged for the advice) and access to AFCA, just to name a few.”
Ms Levy said some of the issues related to limited licensees were outside the scope of her review but said recommendations would make it easier for all advice providers, including accountants who were authorised by an AFS licensee, to provide personal advice to their clients.
Mr Negline said that accountants already had a small range of concessions in the Corporations Act, but they were complex and created a great deal of uncertainty.
“It is very easy for an accountant going about their ordinary work to accidentally fall foul of the laws and provide financial advice, or financial product advice, as understood by the Corporations Act and potentially be doing unlicensed activity,” Mr Negline said.
“That would be an accidental issue, but the law is very confusing about what you can and can’t do.”
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