Is SMSF Licensing Really that Imperative to Your Firm?

Is SMSF Licensing Really that Imperative to Your Firm?
In the first instance, let me emphasise, if your firm currently provides advice around SMSFs that will require a license post July 2016, our strongest recommendation is to complete the necessary training and obtain the appropriate license, whether that be as an authorised representative of a Licensee or through application for a full or limited AFSL license.

However, there are a couple of aspects to keep in mind.

1. TIME it will actually take to obtain your own license if you were to go down that path.

Commentary within the profession is suggesting this could now take 2 – 3 months easy, presuming all the appropriate education and training requirements are met. At present, may application have yet to be approved due to omissions within the actual applications themselves.

Furthermore, ASIC has also nominated a date by which they recommend applications be lodged to have the chance to be granted for July 1. Likewise, for those following the authorised rep path, other market commentary suggests the quality and content of some training courses being run by select groups fails to meet the full requirements. So do your homework and be sure that your training ticks all the boxes

2. CLIENT BASE …. do you really have the client base that requires advice around the SMSF space?

Debate periodically occurs within the market as to whether a SMSF is good for everyone or only those with a certain level of funds to invest. Historically, I had heard the figure of $200K as being the minimum level of investment to make a SMSF worthwhile. However, I don’t wish to enter the debate as to whether that is the case or not. Let’s just say that there are some advisors that have, and do heavily encourage the use of SMSFs by all of their clients, whilst others feel that only a proportion of their clients warrant such advice. Perhaps it is the case that they personally lack the skills to offer such advice, hence avoid the subject all together. If this latter scenario is you, then maybe you don’t require such licensing. Furthermore, pending the number of SMSF clients that your practice currently services, this may the impetus to either grow this service area or get out of it all together.

Regardless, I read an interesting article a couple of weeks ago by Alex Burke titled ‘New SMSFs Slowing as Boomers Retire.’ The article talks about cost versus benefit and the need for SMSFs. The interesting piece of data for me was the statement that according to ATO & APRA, net establishment of new SMSFs had steadily declined since mid 2014, having fallen by 24% in the 12 months to June 2015. This is in part thought to be due to the baby boomers exiting the accumulation phase and therefore being less interested in running their own funds in retirement. So the question that now arises is, if this is the trend, will there be continued prevalence of SMSFs and will licensing therefore be as critical moving forward solely on the basis of whether the provision of such advice will be required in the future? Something to ponder in respect of your firm.

Again, let me reiterate; I do not condone nor recommend, the provision of advice around SMSFs without the appropriate licensing post July 2016. The last thing any firm wants or needs is to have a debate with a client around what advice was actually provided and whether this should have been given. If the area is a little grey, then risk mitigation is always the best way to proceed. However, should your firm be experiencing a trend similar to that illustrated by the data above, it may actually be time to evaluate the continuing provision of such services by your firm.