But accountants who choose to become licensed will have to make some tough decisions about their business models, said Mr Hilton, who is MLC’s national manager for accountant solutions.
Speaking to an audience of accountants at an Institute of Public Accountants (IPA) event entitled ‘What now for the FOFA reforms?’, Mr Hilton said the first decision is whether to service self-managed superannuation (SMSF) clients in-house or enter into a referral arrangement.
To justify becoming licensed, accounting practices typically need to have at least 20 SMSFs “with a view to grow”, said Mr Hilton.
But that is not a hard and fast rule, he added.
“Some [licensed] businesses only have 10 SMSFs, but the size and scale of those clients is so significant they are not willing to introduce them to someone else,” he said.
Such a practice may have a small number of very large SMSFs that are also big commercial and tax clients, said Mr Hilton.
For accountants who want to become licensed, the decision comes down to being self-licensed directly with the Australian Securities and Investments Commission (ASIC), or acting as an authorised representative under an institution’s licence.
Mr Hilton was quick to highlight the disadvantages of being self-licensed.
“If you’re running your own licence, you need to think about developing your own statement of advice [SOA], as well as its ongoing maintenance,” he said.
Mr Hilton pointed to the cost that has been incurred by the financial services industry when it comes to the updating of SOAs and similar documents.
Reputational risk is also a factor to consider before becoming self-licensed, said Mr Hilton – particularly given ASIC’s habit of “naming and shaming” licensees.
“ASIC is obviously monitoring this industry, and you’ve got to make sure that you’re on your toes. There’s more talk from ASIC about doing more reviews of the SMSF system, and I can only see that becoming a greater focus,” he said.
He also highlighted the cost of professional indemnity insurance, along with the fact the buck stops with the responsible manager.
“When we speak to large [accounting] practices – those with three to four partners – they are usually pretty keen to becoming a licensee, but not one of the partners is interested in becoming a responsible manager,” said Mr Hilton.
Whichever way accountants decide to become licensed, it could mean big changes for their business – including new entities and a different trading name, he said.
“Not every accountant will move into this regime. I would expect that potentially half won’t,” he said.
MLC, along with AMP, launched an online referral arrangement with IPA members in May last year. Both institutions also offer IPA accountants a Financial Services licensing package.
Mr Hilton's comments follow those of the chief executive of CBA’s accountancy-focused dealer group Count Financial, David Lane, who last month told InvestorDaily very few accounting firms are likely to adopt the limited licence.
However, this prompted the chief executive of mid-tier accounting firm Power Tynan, Paul Hilton, to respond that many of the accountants in his network would be applying for the licence, which he said provides much-needed clarity and certainty.
