Australian Financial Advisory Services Framework

It is important for CAs to understand the financial services regulations when providing financial advisory services.

In Brief

  • The provision of personal financial advice requires an individual to operate under an Australian Financial Services Licence
  • It is important for members to fully understand the implications and practical application of the financial services regulations and what advice they can provide if they are not appropriately licensed under the regulations
  • Licensees have a range of obligations to do all things necessary to ensure that they provide financial services efficiently, honestly and fairly and should comply with the conditions of their licence

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Regulation of financial advisory services

The introduction of the Financial Services Reform Act 2001 (FSR Act) in 2002 and subsequent introduction of Future of Financial Advice (FoFA) reforms significantly changed the environment in which CAs operate within their practice in terms of the advice that they can provide. The provision of personal financial advice requires an individual to be licensed or authorised. Without this an accountant cannot provide financial advice to retail clients – except within certain exemptions under Regulation 7.1.29 of the Corporations Regulations 2001.

The FSR Act, which amended the Corporations Act, imposed:

  • A single licensing regime for financial sales, advice and dealings in relation to financial products
  • Consistent and comparable financial product disclosure
  • A single authorisation procedure for financial exchanges and clearing and settlement facilities.

The regulatory framework covers a wide range of financial products including managed investments, securities, derivatives, general and life insurance, superannuation, deposit accounts, margin lending and means of payment facilities.

This effects CAs who operated as financial planners providing financial advice and also those in practice who provided what could be categorised as traditional accounting services.

It is important for members to fully understand the implications and practical application of the financial services regulations and what advice they can provide if they are not appropriately licensed under the regulations (for further details on licensing framework see below).

To assist members in public practice in Australia, we have published a guide, Financial Advice and Regulations: Guidance for the Accounting Profession.

The purpose of this guide is to outline what services you can and cannot provide if you do not hold or operate under an Australian Financial Services (AFS) licence, and provide some guidance on operating under a limited AFS licence.

Financial Services Reform Act 2001

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Guide

Read Financial Advice and Regulations: Guidance for the accounting profession

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Financial advice licensing framework

Anyone who provides ‘financial product advice’, as defined by section 766B of the Corporations Act 2001, must either hold an Australian Financial Services (AFS) licence or be an authorised representative of an AFS licence holder (unless covered by an exemption under Regulation 7.1.29 of the Corporations Regulations 2001.

An AFS licence authorises licensees to:

  • Provide financial product advice to clients
  • Deal in a financial product
  • Make a market for a financial product
  • Operate a registered scheme
  • Provide a custodial or depository service
  • Provide traditional trustee company services

An AFS licence can be held by an individual or by a corporation. If held by a corporation, a responsible manager(s) must be appointed/ nominated. This manager(s) must satisfy certain minimum requirements. These requirements are predominately outlined in ASIC RG 105 and RG 104 and include both education and experience requirements. Licensees have a range of obligations to do all things necessary to ensure that they provide financial services efficiently, honestly and fairly and should comply with the conditions of their licence as well as the Corporations Act 2001. They also have specific obligations in respect of the following:

Obligation ASIC Regulatory guide
Financial requirements
RG 166
Responsible managers
RG 105

Compliance, risk management and monitoring, supervising
and training your representatives

RG 104
RG 146

Managing conflicts of interest
RG 181
Dispute resolution
RG 165

Compensation and insurance arrangements

RG 126
Conduct and disclosure

RG 168
RG 175

Alternatively, a CA may operate as an authorised representative of an AFS licence holder. An ‘authorised representative’ status may be issued to individuals and other entities provided the person or entity can satisfy the particular AFS licensee requirements. As the AFS licensee is ultimately responsible for the advice given by its authorised representatives, licence holders are required to have in place structures, which allow for monitoring, and in many ways controlling, the financial planning related activities of authorised representatives.

As part of operating under an Australian Financial Services Licence, in order to provide financial planning advice described above anyone providing financial advice is required to meet the educational requirement in accordance with ASIC’s RG 146. See further details below.

Financial product advice

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Corporations Regulations 2001

View exemptions in Regulation 7.1.29 Corporations Regulations 2001

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RG 146 Training requirements

Regulatory Guide 146 Licensing: training of financial product advisers (RG 146), is an Australian financial regulation issued by the Australian Securities and Investments Commission (ASIC) related to the minimum training required by individuals providing financial advice.

RG 146 has three key components:

  • Generic knowledge requirements - having knowledge of the environment in which an adviser operates and understanding of the context in which the advice is given.
  • Specialist knowledge requirements - specific knowledge areas in which training may be required based on the advice intended to be provided these include financial planning, securities, superannuation, managed investments, derivative, insurance, foreign exchange and self-managed superannuation funds.
  • Skills requirements.

Chartered Accountants ANZ has partnered with Kaplan Professional* to develop the Financial Planning Qualifications pathway that provides Chartered Accountants with the essential skills and knowledge needed to be RG 146 (and RG 105) compliant in the specialist knowledge areas of Financial Planning, Superannuation and SMSF, Life and General Insurance and Securities and Managed Investments, Cash and Deposit Taking products.

The program has been specifically developed for members and recognises subjects previously completed under the CA Program and/or the specialist SMSF Specialist program ensuring you only need to complete subjects and assessments not previously completed through your CA qualifications.

Note: Where members have selected an AFS licensee or considering AFS licensees they will need to confirm with the AFS Licensee that these subjects/course meets their requirements. Ultimately authorised representative competence is the licensee’s responsibility. Licensees may require additional subjects / course to be completed.

*Kaplan Professional is a registered training organisation (RTO No. 90116) listed on training.gov.au

ASIC's RG 146

View ASIC's RG 146 Licensing: training of financial product advisers

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Programme overview

Download the programme overview

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Enrolment form

Download the Diploma of Financial Planning enrolment form

Incorporating financial advice into a practice

In simple terms there are four main structures or options that can be considered:

  • Apply for your own AFS licence or limited AFS licence.
  • Become an authorised representative of another entity’s licence. 
  • Recruit/develop a joint venture with an entity that holds an AFS licence.
  • A referral program to an appropriately licenced financial adviser/practice.

Each of these options has a variety of considerations in terms of costs, client service, compliance and time. In many cases there may only be one option that is appropriate for a practice.

We have developed guidance on factors you may want to consider when selecting an AFS licencee.

Download the guidance

Download the guidance; Selecting an Australian Financial Services Licensee

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