Choosing the right advice model
Secondly, you need to consider which advice model is right for you. Do you get your own Australian Financial Services Licence (AFSL) from ASIC or become an authorised representative of an existing licensee? The former may give you more freedom but could be more costly when all things are considered. It also comes with greater risks and responsibilities.
Some of the major costs you need to consider are professional indemnity insurance (likely to be at least $8,000 per annum), a requirement for you to have three months’ worth of anticipated expenses kept in a bank account, minimum net tangible assets and surplus fund positions, audit costs, Financial Ombudsman Service (FOS) membership and ASIC lodgement fees. Then you’ll have to work out how best to manage your obligations under the licence. Do you outsource things like compliance support, training, research and software? If so, there are dollar costs. If not, there are costs on your time, focus and energy.
The Government recently announced the introduction of a new form of AFSL in response to the removal of the accountants’ exemption for SMSF advice. It is designed for accountants who want to provide SMSF guidance and certain ‘class of product’ or strategic advice. This reduces the burden a little in some areas, but many of the costs and issues are comparable.
One of the key issues for many accountants considering becoming authorised is whether they will be able to retain their independence. If the licensee requires you to use its products, you should find one who offers a wide range of financial products from a range of providers.
You should ensure that your licensee shares your philosophy on client relationships. If your licensee values your relationship with your clients, this will be reflected in more than just the products you can offer. For example, if you try to change licensees, will they let you take your clients with you? Will they support you in finding a successor for your business? Your licensee should enhance your relationship with clients; it shouldn’t raise questions about conflicts of interest or financial instability.
If you decide to become authorised, you should also consider how a licensee will support you to provide advice and grow your business. Make sure you ask them
what they can credibly offer you. You should have confidence to talk about your licensing arrangements to your clients if they ask about it, knowing that a substantial organisation stands behind the advice you give. Ultimately, it will be the licensee who is responsible for your advice.
[breakoutbox][breakoutbox_title]DeakinPrime Diploma of Financial Planning[/breakoutbox_title][breakoutbox_excerpt]The IPA has an arrangement with DeakinPrime to provide RG146-compliant training.[/breakoutbox_excerpt][breakoutbox_content]DeakinPrime Diploma of Financial Planning
The IPA now has an arrangement with DeakinPrime, the corporate education arm of Deakin University, to provide RG146-compliant training. A full Diploma of Financial Planning (DFP) comprising four modules can be completed in 12 months or less. Individual modules may also be completed as required.
The program is accessible online and available to both IPA members and non-members currently working in the accounting, finance or banking industry.
Education requirements
For those seeking limited authorisation to provide only SMSF advice and related advice, completion of modules DFP1 and DFP4 may be sufficient to meet initial RG146 education requirements. AFSL licensees may also require completion of some additional proprietary training for those seeking to become one of their authorised representatives.
In order to provide broader SMSF advice (eg consolidation, switching, superannuation generally, class of product advice), the complete DFP will be required.
Areas of advice
On completion of the DFP, you will have met RG146 requirements to provide personal advice in Tier 1 products as follows:
– financial planning (generic knowledge)
– life insurance
– securities
– managed investments
– margin lending
– derivatives
– superannuation
– general insurance (exception to Tier 1 products).
Again, AFSL licensees may also require completion of some additional proprietary training for those seeking to become one of their authorised representatives.
Enrolment information
Applications for enrolment open in October 2012, with discounted pricing available to IPA members. The program costs between $375 and $450 per module, depending on IPA membership and/or commitment to the Financial Services Package through the IPA. Similarly, the cost to complete all four modules of the DFP ranges between $1,500 and $1,800.
More information can be found at the DFP webpage of the IPA corporate site.
[/breakoutbox_content][/breakoutbox]
Scope of advice
Thirdly, you need to determine the scope of advice you want to provide. Will it be SMSF-related, strategic advice, risk-only advice or comprehensive advice? The scope of your authorisation should match the advice you want to give. MLC and other major licensee groups offer a range of options to choose from, with different levels of support, education requirements and costs.
If you are planning to limit your advice to SMSF-related or strategic issues, you need to consider how your clients will obtain the advice that you are not providing, such as specific product recommendations for risk or investment products. The answer may be to marry a number of the advice models; for example, by also having a referral arrangement.
Employ a planner
For those who want to provide financial advice to their clients as part of their business but feel that the benefits of doing it themselves do not justify the costs, an alternative is to employ a qualified adviser. This way, you get to remain a tax specialist while ensuring that your clients receive financial advice from a specialist financial adviser.
Having someone in house makes it easier to manage referrals and conduct joint meetings than is typically the case with an external provider. And because the arrangement is in house, you benefit from any additional revenue, profit and value that is created.
Finding the right financial adviser is the trick with this approach and then being able to successfully integrate their advice into your practice. A well-resourced licensee with a large network will be able to help you find an adviser and assist with integration by providing access to good-quality practice management support and a range of tools and frameworks.
One of the key considerations when employing a planner is whether you want to offer them equity in your business. You should expect that those who bring clients with them will want to have this value recognised.
If you want to ensure your clients receive the right financial advice – and grow the value and profitability of your business – then now is the time to start planning your integrated advice model.
