Mr Malley said that up until about 20 years ago, advice was solely the domain of accountants.
“[It was around] then that others came into the profession, into the financial planning area, and as a result, that brought other people into the advice market,” Mr Malley told a recent CPA Australia conference.
“[Recently] I referred to the financial services sector these days being the largest circus tent in town.
“[ASIC commissioner] Greg Tanzer mentioned [at the CPA National SMSF Conference] some of those people that we’d hate to think of as part of our financial services sector given their behaviours, but effectively the financial services sector is defined today as anyone who’s an agent for insurance at one end and the quadruple degree at CPA at the other, and we’re all under this banner of financial services advice.”
Mr Malley said the accounting profession must now decide whether “to take the leadership in this area – what we call reclaiming our territory”.
He acknowledged there were, however, some challenges ahead for the profession in achieving this.
“The regulations have changed, and I have said to various ministers and regulators over the past 12 months to just spare a moment for accountants that have given the same advice to the same client for the past 30 years and now can’t give them the same advice,” Mr Malley said.
“We recognise how challenging that is, but we also recognise that we have sent extraordinary amounts of communications about this.”
It is also important to understand how politics is impacting regulations, he added.
“The politics that is impacting on regulations is quite profound. Every time a politician of any persuasion gets up and says they’re going to protect the world from everything, all the time, it puts more and more pressure on the regulator,” he said.
“It’s important that our voice becomes stronger and stronger in the public eye, so we can ensure there are some sensibilities in what you inherit.”
To a degree you are right. A few points to note.
1 – PI is not that easy to get
2 – PI is harder to maintain each year
If you become an auth rep the dealer group provides the PI and the accountant pays, expensive yes, hard to get no.
3 – The problem has been accountants setting up SMSF’s and not worrying about what is happening inside them investment wise and insurance.
Em, disagree with that. 1) Clients often want an SMSF because they want to self- manage. 2) Clients will often see and accountants will often refer SMSF clients to a financial planner for investment advice.
4 – It sounds like you have a few conflicts of preparing and auditing accounts as well as setting them up
? You do a tax return and set of accounts for one client and an SMSF audit for another. You are never doing both for the same client. Accountants who do are in breach of audit standards just like financial planners who churn insurance are in breach of their compliance standards. 90%+ of accountants do not do both just like 90%+ of planners do not and never have churned insurance
5 – No said a financial planner knows more than you just that our skill set and the things we look at are more important to protecting clients’ interests than just doing a tax return and audit after it all happened.
What I really wish a financial planner did know but can never tell me – what is happening with interest rates (are we entering a low interest rate world)? Where are share prices are heading? Are property prices set to go up or down? Why do indexed shared funds preform just as well if not better than managed funds? Not blaming the financial planner here just pointing out what would be profoundly useful to know is the very thing they, like everybody know nothing about – not their fault just a fact of life. As a result what is it that the financial planner does know? The answer is they understand financial products and how to apply for them and set them up. Accountants fill out complex tax forms etc; planners fill out complex insurance forms etc.
*None of the above is an exhaustive list of issues from both sides but does continue to prove why accountants need to be licensed to be forced to look after the clients best interest first and not just doing what they have been doing for years and years.
If planners are looking at the more important things like “protecting clients’ interests and just doing a tax return and audit after it all happenedâ€.
I wonder what accountants are doing when they advise and help their clients set up accounting systems, discuss cash flow, set up business structures, build reporting systems, plan and facilitate borrowing etc and so on.
As an accountant I need a financial services licence to set up an SMSF – on the other hand I can advise a client on an asset protection strategy, setup a Pty Ltd to effect it, design an equity structure for the Pty Ltd including trust holdings and the like. This strategy can be aimed at delivering cash flow via franking credits in retirement. No licence required for that why?
The original comment is not that accountants are considered to be more trust worthy in the eyes of the general public, it is that they are more trustworthy than many financial planners. There have been enough samples of clients to confirm that accountants are considered more trust worthy by the general public than financial planners. As a financial planner myself I do not necessarily agree with that view and believe that it is influenced by the different complaint systems which exist at present, which is why I support accountants needing to be licensed (amongst other reasons). In relation to my personal opinion (taking into account I am a planner married to an accountant) I would say that on average accountants are more trust worthy than financial planners however three of the four biggest crooks I have met across the two occupations were accountants.
It’s all about perception. Do clients perceive accountants or non-accountant financial planners to be more trustworthy? I dare not answer this question without asking a representative sample of clients first.
To a degree you are right. A few points to note.
1 – PI is not that easy to get
2 – PI is harder to maintain each year
3 – The problem has been accountants setting up SMSF’s and not worrying about what is happening inside them investment wise and insurance.
4 – It sounds like you have a few conflicts of preparing and auditing accounts as well as setting them up
5 – No said a financial planner knows more than you just that our skill set and the things we look at are more important to protecting clients interests than just doing a tax return and audit after it all happened.
*None of the above is an exhaustive list of issues from both sides but does continue to prove why accountants need to be licensed to be forced to look after the clients best interest first and not just doing what they have been doing for years and years.
“There are many great accountants and financial planners out there but I challenge the notion that an accountant can also be a fully qualified financial planner and sufficiently keep up to date and relevant across both areas.â€
I am a CPA and to be straight up I think ASCPA have done a real hatchet job looking after their members when it comes to the so-called “removal of the exemption.†The main problem with ASCPA is they have become a bureaucratic organisation all about government, big end of town and big solutions. As a result they have real trouble thinking through and creating low cost practical solutions.
Now getting to your statement – you are right but here is your problem. To be qualified to do both all a CPA just needs is a licence. I can become an Auth Rep, some may need an RG 146 but that is hardly an intellectual barrier, the price might hurt but you do not need much of an IQ pass RG 146. After that a few $1,000, some PI insurance and a bit of structured CPD and ‘voila’ I am a qualified financial planner.
Most CPA’s have been setting up SMSF’s for years and during that time were never advising on what was going on inside them – investment wise, insurance etc – they left that to the financial planners and/or the clients. What the post 1 July 2016 reforms have done is deem an SMSF to be a financial product not just what is going on inside it. Now I am sure that financial planners will say that is quite correct – an SMSF is a financial product. Well maybe, but I am a qualified SMSF auditor as well as a registered tax agent and an accountant. As such I complete a significant number of SMSF’s audits every year, prepare a lot SMSF accounts and tax returns and help out clients with a lot of SMSF issues, including reporting to Centrelink etc and so on. To do all this I have little choice but to know a lot about this so called financial product. I have little doubt if you put me in a room with a typical financial planner, licenced to set up an SMSF, my knowledge of what as SMSF is etc and all the rules that underpin them will on balance far exceed anything the financial planner knows. Now reverse that and say the topics are investments and insurance and you will get the opposite? If I am the accountant who is an auth rep, I too am licenced but now it is the financial planner knows a whole lot more than me.
This is the problem and what ASCPA has done absolutely nothing to deal with, think through or sort out.
“The regulations have changed, and I have said to various ministers and regulators over the past 12 months to just spare a moment for accountants that have given the same advice to the same client for the past 30 years and now can’t give them the same advice,†Mr Malley said.
If the inference on this comment is that accountants have been giving fully comprehensive and personal financial advice and have done so for the past 30 years….ummmm sorry but that’s a direct breach as they have not had the licence to do so. Not one to pick at hairs but if the reverse applied and we as financial planners had been providing fully comprehensive tax advice (without a licence) there would be an uproar.
There are many great accountants and financial planners out there but I challenge the notion that an accountant can also be a fully qualified financial planner and sufficiently keep up to date and relevant across both areas.
Life Insurance agents were giving advice to families and business people when I entered the business in 1958 and have been ever since.
agreed Paul C
Hmm.. Dear Mr Editor, you seem to have removed the link that I included in the above comment? Could you at least please include this clarification?
(Link in original post removed by editor).
In summary, ASIC accepting an enforceable undertaking (EU) from a Sydney-based financial services company for providing inappropriate and difficult to understand self-managed super fund (SMSF) advice (May 2016).
A brief search suggests a long established accounting firm which setup an FP division.
Source: ASIC Media Release 16-149MR
http://asic.gov.au/about-asic/…
Dear Alex Malley.
Good luck with administering your new AFSL License. Surely all the ARs will be 100% compliant and there will never ever be a client complaint, which would otherwise have to also be investigated by the ARs professional body.
Clearly no conflict of interest there.
Best,
…..
Alex Malley, here is iust one example of an accountant taking leadership:
http://www.moneymanagement.com…
Sure this is just one bad apple and there are many great accountants who should not be tarred with this brush (same goes for financial planners). But it’s also a great example of why regulation of SMSF advice is needed. And we haven’t even touched the history associated with agri products.
As for the ‘insurance agents’ comment, most reputable advice firms require a min CFP level or relevant degree these days. Many FPs have postgrads. Alex, you are being very disingenious here.
The bar has been raised, and continues to be raised. And so it should be. Welcome to a level playing field.
all good
Stephen, I appreciate my comment is anecdotal and definitely not a conclusion of research. As a student myself, I appreciate where you are coming from, so I’ll preface my next comments by saying, “I think”. I think there is a significant naivete within accounting circles where I have witnessed a projection of their ability and skills in accounting and tax to financial planning areas. For example, accountants hold empirical knowledge of SMSF compliance, tax, even SISA but often stop there. The investment strategy, is cash, the contributions don’t target longer term income needs and they don’t much care about tax consequences for the estate: their core-skill domain. At the same time I have seen atrocious tax advice from financial planners, dabbling around the edge of a profession because of assumed knowledge. We will all be better off when everyone is adequately trained. Good luck with the Phd.
“flogging $3000 SOA’s for simpleton strategies”. I think you may find that the majority of that $3,000, regardless of the strategy gets swallowed in the cost of running the business/keeping the doors open. Thanks to compliance and all the costs associated with the draconian rules we have to live by, even a $3,000 SoA is borderline break even.
When the only tool you have is a hammer, everything looks like a nail. Seen that too many times to mention from our accounting friends…
How ironic Alex. You refer to the financial services sector as a circus and then behave like a clown.
Poor display of leadership mate. Give yourself an uppercut.
Nonsensical and inflammatory comments like these do nothing for the image of professionalism for any group. There are some great accountants who are more than competent in providing advice to modern standards, and some who have no clue. Likewise there are some great planners who take the time to understand in depth taxation issues, and some who have absolutely no idea.
Just as I am sure not every accountant thinks every other accountant is a shining example of their own profession, throwing dispersion by inference on others in the existing advice community is humiliating only in the depths of ignorance in the statement.
This smacks of someone trying to remain relevant, like an Atari/Blackberry/Nokia/Kodak manufacturer saying how wonderful there system was twenty years ago.
The laws, regulations and client expectations in the advice piece (for accountants and planners alike) have changed, like it or not. Just get on with it and become compliant & relevant by deed, rather than being the empty gong booming on about abstracts.
Car nut, you make the case for how Alex Malley is out of touch, and how the accounting world has split in two. There are those accountants who recognize that they don’t have the research, they don’t want to provide written personal advice, they don’t want to do more CPD in another area, they don’t want to pay licensee fees for occasional conversations with clients about stuff, that frankly, they no longer follow deeply. And nor is it profitable enough for an occasional interlude into that space. So, congratulations to that section of the accounting world that knows how they deliver real value; tax advice, compliance work, audit and all the other specialized high profit areas they operate in.
Unfortunately though, there’s still a few dinosaur accountants who think that because they once analyzed a balance sheet at Uni it means that they COULD work out whether BHP is better than RIO, or they could manually cashflow a super vs mortgage comparison or they could compare the fees on a supposedly low cost industry fund versus any number of genuinely low cost retail funds – if only there was enough time! But they should be able to talk about it with their clients anyway (because they saw an ad about it?), and this is traditionally THEIR space.
I suspect most accountants have realized that the Financial Planning is now a specialized area of finance that needs many specialist tools and services to operate, as well as subjecting its participants to such a high degree of oversight. As there are easier ways to make money in areas they actually care about, their real challenge now is to find competent financial advisers to refer to, or employ.
How is this a volatile statement? I have met many good financial planners and accountants. At the same time I have met financial planners and accountants where the first thing I do after leaving the meeting is check my wallet is still there. He has not stated that accountants are automatically more trust worthy than financial planners, he has said they are more trust worthy than many financial planners. He has also stated they need to be qualified and follow the same compliance rules — which they should.
They should, provide they become licensed and operate under the same compliance regime as financial planners (ie) provide SOA’s and are responsible to FOS.
Car nut, Accountant’s can continue to provide the advice as long as they are qualified and licensed to do so… Much like everyone else needs to be. This is just making it a level playing field.
Allowing them to provide unlicensed advice because areas are not ‘complex’ can lead to issues such as Dave has mentioned below which has cost the client $53,000 because the Accountant didn’t understand impact on social security changes by establishing an Account Based Pension.
I don’t know about you, but $53,000 is a lot of money to most people.
So very true. Financial Planning is a giant circus these days. The industry bodies have hijacked this industry, stifled it with complex compliance that helps no one but the licensee protect itself from a thriving litigation industry. The FP was born from the old insurance agent as the lump sum market grew & the rest is history. The bottom line is accountants should be able to give advice, they are qualified to do so, maybe not on some complex risk strategies, share portfolios or DSS issues but super, TTR’s, investments, managed funds, blue chip shares, pfffft, it’s insulting to even suggest they shouldn’t advise their clients. More evidence of protectionism & rorting going on in an industry that has an ever growing reputation of snake oil salesmen flogging $3000 SOA’s for simpleton strategies. It’s a circus!
The accounting profession needs to prove it is capable of delivering professional and compliant financial advice before they talk about taking a leadership role in the profession. I have grave concerns based on what I am seeing out in the real world. Unless there is a huge change in attitude, this will become an almighty ticking time bomb.
I think you are making quite a volatile statement Paul Tynan, would like to see your research that enables you to make and substantiate this.
The findings from my current research for my PhD do not quite agree with your comments.
Cant we just stop this bickering. I really dont care who gives the advice provided they are competent and have the necessary legal registrations. There are plenty of people out there who need good, sound advice so lets get on with it!
I have come across a recent situation where an Accounting firm has set up a SMSF, directed from a estate settlement into a term deposit then converted the structure into “pension phase” for an individual under preservation age on disability support pension. Due to not leaving the funds in accumulation phase centrelink have asked for a refund of $53,000 in over payments and interest penalties. Gee tax effective but advice that has cost the individual dearly. If Accountants want to give advice they need to look at all aspects of advice not just tax !
Having been in three accounting firms as a financial planner I can share that, accountants are more trustworthy than many financial planners BUT mistakenly presume that they know enough about financial planning issues and what the financial planning process about. If Alex’s call to arms is to be taken seriously accountants must qualify as financial planners – and many could easily enough – and then stay licensed, relevant and valuable. Most accountants are stuck on the treadmill of compliance.
I think the recent LACK of take up by Accountants to obtain a limited license is fairly obvious, times have changed, leave the financial advice to the professional, which are… Financial Advisers.
Well they are clever, lets give them that, they got 10% commissions for putting clients into those ‘tax driven’ schemes.
And lets not miss the point of the undeniable conflict of interest accountants have, they can only recommend one product, and it just so happens that they will get an ongoing accounting fee for advising you to take up that product.
Obviously when Alex Malley is referring to “others that came into the profession”, he is specifically excluding those CPA’s that made a motza by flogging tax deductible Timber & Education managed schemes to Family Trusts they established for 80 year old spinsters.
Yes, accountants certainly took the lead in recommending tax driven agricultural schemes to their ever trusting client bases. There are of course many good accountants out there, but very few of them manage to be good accountants and good financial planners at the same time.
The majority of accountants will not be willing to do the requisite study and professional development nor develop their skills and thinking to really understand or become finance professionals; I’ve worked with accountant dealer groups and their understanding of even basic financial principals and concepts is both deploarable and dangerous when coupled with their hubris regarding the subject.
I don’t give accounting advice; please don’t give financial advice. For the good of us all.
Shallow comments like this are not going to reclaim any territory!! The world has changed, sure
its been a circus but I have seen any amount of accountants trying to ride
bikes that are way to small, wearing over sized shoes and big red noses.
For a guy who reportedly prides himself on looking forward, it seems that there’s a lot of ‘looking in the rearview mirror’ about his comments. Accept the fact that times have changed Alex.
Mr Malley has his head firmly embedded in his ……. the sand, and it must have been there for the last 30 years.
Yes, and it was a CPA that “advised” my mother-in-law to start up an SMSF with only $100,000 and it was a CPA who “advised” her to invest 80% of those funds into a property trust that went bust within 5 years and which she is still waiting for her return of 20c in the dollar. Excellent advice, bravo.
Dear Alex Malley, please read the following self help book, it will do you wonders:
“who moved my cheese”
This guy’s arrogance is astounding as a “professional”.
Obviously their dealer group isn’t travelling too well. One questions Alex’s decisions to invest MEMBER’S money in this area given accountants’ current disinterest- if it was an important part of their business in this modern day then why must it be reclaimed?