We all need to decide where we stand regarding financial advice. One option is to use a digital financial advice platform.
Digital Financial Advice
We have four options around financial advice. The first option is stay away from advice altogether. The second option is to use our own AFS licence. We can step under the umbrella of a large AFS licence network. Or we can refer our clients to a financial planner.
And for this fourth option, we can refer our clients either to a living and breathing individual, a financial planner. Or we involve a digital financial advice platform. And the later is what we wanted to find out more about.
So, we met with Jim Hennington, the founder and CEO of ASAP. ASAP stands for Accountants Scaled Advice Platform and started in 2016. This is what we learned.
To listen while you drive, walk or work, just access the episode through a podcast app on your mobile phone.
Survey
About 50% of accountanting firms in Australia have some sort of AFS licence. According to a survey by Accountants Daily of 484 accountants, 69% of these accountants with an AFS licence are thinking of exiting financial advice in light of the new mandatory education requirements. While 16.7% haven’t decided yet. Here is a link to the survey.
Advice
An unlicensed accountant (who is a tax practitioner) can explain the tax and compliance treatment of the client’s options, as an exempt service under Regulation 7.1.29.
Unlicensed accountants can provide factual information and explanation of relevant rules. They can provide compliance and tax advice and explain potential tax consequences of transactions. And they can complete the administrative tasks around the advice received.
But they must stay away from inadvertently giving personal product advice. Advice in this context is broader than giving specific recommendations. It includes any comment or generalisation that the client thinks was intended to influence his or her decisions to vary a particular financial product. The product advice must be referred to a licensed adviser.
Accountants and tax practitioners without an AFS licence cannot recommend the use of a specific financial product (e.g. an SMSF) for the client’s transactions, nor recommend transaction amounts other than highlighting maximums or minimums to minimise tax. They must provide a specific disclaimer set out in Reg 7.1.29(4)(c)(ii) telling the client to take advice from an AFSL holder.
Any advice, opinions or generalisations about whether to establish an SMSF, to do a rollover, establish an LRBA, commence a pension, commute or wind-up is financial product advice that requires an AFS licence.
Digital advice platforms can provide this advice in an inexpensive and efficient way.
Responsibility
The (digital) adviser takes responsibility for the scoping as well as the actual advice. Responsibility for the advice transfers to ASAP under the client’s direction.
Process
Here is the common process of engaging a digital advice platform. The platform guides you through each step.
# 1 What is your client’s life stage? Is your client accumulating, approaching retirement, entering retirement or retired?
# 2 Discuss who will provide what advice. What has the client already decided? And what advice is required from the platform? Will a third party provide advice as well? And what advice is not needed?
# 3 The accountant facilitates and the client engages the platform. A compliance confirmation letter that summarises the information in # 1 and 2 accompanies this engagement.
# 4 The platform then goes through a fact find exercise to collect missing information. The accountant uploads the completed Excel spreadsheet into the platform.
# 5 The platform generates a Statement of Advice which goes through ASAP’s quality control process and then is sent to the client as well as the accountant.
MORE
Partial Commutations Require an AFSL
Disclaimer: Tax Talks does not provide financial or tax advice. This applies to these show notes as well as the actual podcast interview. All information on Tax Talks is provided for entertainment purposes only and might no longer be up to date. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s personal circumstances.