In a new opinion piece published on ifa, Scientiam head Nigel Baker argued that the growing number of accountants in Australia (currently at 220,000) could serve as a boost to the advice sector.
“Accountants may hold the key to addressing the skills shortage in financial planning and making advice more accessible. They are highly respected and trusted by their clients and ideally positioned to offer personal advice and general information,” Mr Baker wrote.
He said that regulatory changes and rising costs turned many accountants away from advice. However, the impending Quality of Advice Review (QAR) in December could see them “pour back into the sector”.
“Accounting firms are valued at between 0.8 and 1.2 times earnings compared to roughly 2.7 times for financial planning businesses,” the op-ed reads.
“While that 2.7 number relates to holistic advisory businesses that provide superannuation, investment and retirement advice, accountants don’t necessarily need to go down the comprehensive advice route to gain the benefits.
“Demand for general information is also strong. Who better to educate people on basic financial principles than their trusty accountant?”
However, Mr Baker conceded that before advisers and accountants can work together again, regulatory reform must happen.
The QAR is expected to tackle a number of current issues, including regulation, compliance and how to make professional advice more affordable and accessible for Australians.
Scientiam’s own submission to Treasury argued that the term general advice “should be scrapped” and be labelled as general information, saying that the change would strengthen consumer protections, minimise confusion and encourage more exploration and investment in digital advice and information solutions.
A number of industry groups have also publicly issued their QAR submissions to Treasury in recent weeks, including the FPA, SIAA, ClearView and the Joint Associations Working Group (JAWG).
The QAR, to be conducted by Michelle Levy, will be provided to the government by 16 December this year.
“The current advice regime was built around large institutional product manufacturers and their aligned distribution networks. It was not designed for educated, qualified professionals,” Mr Baker continued.
“With the banks and institutions all but gone from personal advice, it’s time for regulation to keep pace to attract new talent from other professions.”
Read the full piece here.
Over just the past 2 couple of months I got new clients in where the accountants have set up an SMSF for them ( yes, they are licensed!). NO SOA, SMSF’s totally not suitable, clients have no idea what they have done. Accountant asks, what are you going to invest in? Oh, I like to dabble on the share market. Ok, says the accountant, go ahead, here is your investment strategy, you can invest in 80% shares in OZ and keep 20% in cash. No other advice, SHOCKING! Best interest duty? FASEA code of Ethics? Oh, they only apply to Financial advisers, thats right…
They can provide advice, they just need to follow the rules and be suitably qualified. If the rules mean that advice is too expensive then the issue is the rules and not the people providing the advice. This is just a talking head for a Fintech trying to get sales via accountants. Unless he is Xero he will struggle with that because most accountants struggle with the concept of a shout at a bar.
When I’m allowed to charge for and lodge tax returns, Accountants should be allowed to provide financial advice.
It would be so easy if financial advisers could give advice off the cuff and land all responsibility for that advice back in the hands of the client too…
The Accountants successfully sit the exam formerly known as FASEA, get a Grad Dip in Financial Planning and do a Professional Year – sure, why not?
Either we are our own Profession, or we’re not (and we are). Accountants are a different profession.
You wouldn’t let a Pharmacist perform brain surgery, would you?
I often wondered why the towns Soup Kitchen was the busiest business in town…then after working in an Accounting business for 5 years I understood. The problem is Accountants charge in 5 minute increments and the Financial Advice they give to people is in that five minutes…It’s like getting long term wealth advice via tic tok. I’d often see clients and think if only they had of spent 1-2 hours with me, rather than 10 minutes with the Accountants.
No problem with accountants providing advice, let’s just make sure EVERYONE has the same compliance obligations, be it accountant, planner, phone operator or anyone. I read accountants here saying I could provide this advice for a fraction of the cost. As a Planner I could do exactly the same advice for a fraction of the cost if I didn’t have the compliance and SOA obligations. Show me the Licensee or Auditor that allows a move to Pension phase without an SOA please or contributions with an ROA/SOA. If you are talking to a client about what “they” can do, then it is personal advice and we ALL should have the same compliance obligations!!!!! Let’s hope the QAR uses some common sense!!!!
From years of pure observation and no compelling evidence: Not all accountants are able to master the discipline of financial advice. Just like not all financial advisers are able to master the discipline of accounting. Just like not all general medical practitioners can master medical specialities, holistic healing, natural therapies etc. Financial planning does have a “type”, just like all other disciplines/professions have a “type”. An interesting study would be what is a typical financial adviser “type”. Any private sector enterprise want to fund such a research project, please let me know.
I totally agree. Financial Planning and Accounting are totally different professions with different skills sets but which happen to have some overlapping aspects….in particular, tax.
Angelique, you of anyone should know that Australian and Overseas Academic research has already conclusively proven that people who seek out an “ongoing relationship” with a Financial Planner ( a well defined term ruling out Accountants, stockbrokers and friends) have a higher level of Financial Well being. (happier & wealthier) Hence the need for “study” is over what’s needed is action at making it easier for “financial planners” to provide the advice.
I am an accountant, tax agent and SMSF auditor of 35 years standing and a member of the IPA and Chartered Tax Advisor.
It does not serve my clients best interest if I have to advise them that I can only provide factual advice. These are clients that use our firm services on a regular basis. In most instances a $250 consultation is all they need!
I have proposed to the Royal Commission the establishment of 2 categories reflecting the structure of the financial products industry.
1) The role of the advisor- The Investment Advisor. Provision of advice but restricted in recommending financial
products. Fee for service no commissions or conflicted remuneration, must remain independent, program of
ongoing CPD.
2) The role of the dealer in financial products- Financial Dealer. This is the boiler room operators, usually investment
companies, public super funds etc. Employ staff to sell their investment products based on the investment plan
prepared by the independent advisor. Restricted from selling financial products of other investment companies
and super funds.
Accountants see their clients on a regular basis and the provision of investment advice can be delivered in a very cost effective manner.
I have 3 instances where my client were charged between $1500 and $2,400 to provide financial advice when all they wanted to know is how to set up a pension income stream and make non concessional contributions. My firm would have charge them no more than $500 for such advice and the advice would be better tailored to their needs as they have all been long standing client of my firm.
I and several of my fellow accountants eagerly await the day accountants will be allowed to provide independent fee for service investment advice ( not product selection).
Gerald Kirk
Kirks Accountants
And there is the problem Gerald. Your “simple advice” of $500 ignores using a 2nd account for the non concessional for estate planning, re cont for the same reason, Centrelink consideration to a young spouse, investment make up and risk and return conversation – Just off the top of my head. The $500 could have cost them and the Estate tens of thousands of dollars
fails best interest duty – standard 2 and doesn’t meet the Safe Harbour provisions – and also trips up on standard 5 of the FASEA code of ethics. – not bad for the first attempt of an accountant playing out of patch. I didn’t say it was right outcome – but he was giving product advice – and it was personal advice.
So you are saying that you would complete a fact find, fee disclosures, fund comparison, bid, Centrelink considerations and projections and then put all of this into a Statement of Advice and present to the client for $500????? Or perhaps does your comments illustrate that your fee comparison is not equal. In no way am I saying your advice is wrong or not in the clients best interest. Nor do I think you don’t know your clients well and what advice they need. But perhaps let’s both play with the same compliance obligations and then we can appropriately judge other professionals fees.
The minute accountants agree to provide all their advice in writing, the same way financial planners do, then they can play in this space. The fact is, accountants have always had the luxury to have a 5 minute chat with a client, take minimal if any notes, make a recommendation on the spot with little to no research, and never providing any documentation covering the advice. If financial planners were able to rely on professional judgement the same way that accountants do then the cost of financial planning advice would fall. Also could you imagine the outcry if financial planners were arrogant enough to say we should be able to an accountant’s job without the training and following the relevant obligations accountants have. Maybe accountants should stick to what they have being doing all this time, providing unlicensed financial planning advice instead of looking for a carve out.
Unless the client is a business client, the accountant see them once a year. To do their tax. Which is really just data entry for something that has already happened and can’t be changed. Accountants have such a great loyalty because many clients walk away with a tax refund so think they have done an amazing job.
A Financial Adviser is looking back, forward and sideways to meet current and future goals that the client has and that the adviser has helped to identify. If they are ongoing clients, they would likely have been seen and attended to several times in a year.
Gerald, I can’t agree with your comments and I hope we don’t go down the path of an accountant carve out again. Been there, done that and it didn’t work. Accountants and Financial Advisers really are different beasts.
The fact that you did not mention writing a compliant SoA as part of your process suggests that the $500 fee is a bit light on.
Gerald, thank you for pointing out the big issue. Financial advisers could also give simple advice to move their super to a pension and/or make concessional contributions. Easy, would be happy to do it for $500 as long as there was no paperwork required.
However, and this is the bit that most accountants don’t get, is we don’t just do what the client wants. We look at the alternatives, we make sure this is the best for them, we compare their super funds and investments to make sure the one they are in is suitable for them, we look at implications from an estate planning perspective.
There is so much more to it that just having a 30 minute chat about how to convert their super to a pension.
Gerald
I am a Financial Planner and I concur with you 100%. My industry like your Profession is NOT Rocket Science, it is largely based on using and maintaining a consistent working knowledge of relevant technical knowledge with small nuances to reflect personal circumstances. Accounting is far more complex. The Financial Planning Industry is a debacle based on political self interest that is indebted to industry funds who continue to provide funding for Australia’s ongoing Infrastructure rollout. At least the Accounting Profession deals with their Academic snobbery by acknowledging there is a difference between Chartered Accountants and Certified Practicing Accountants. Financial Planning hopefully will become self regulated where we individually join our own Institute. An effective Institute would set the framework for PI Insurance. Ironically our Licensees do provide a forgotten overlooked service of collecting income etc this for a small business is more efficient that employing an administrator to reconcile accounts.
Gerald, I went to work for an accounting firm as their in-house financial planner. I had a dual meeting with clients of the accountant where he outlined some very complex structural advice at the beginning & then gave an introduction to me to say I’d be helping with their super & insurance needs.
After the meeting I asked the accountant if they provided the client with a summary of the recommendations he’d outlined. ‘No way’ he replied, ‘That’s how you get sued. If something goes wrong I can say they misunderstood what I said or implemented it incorrectly. Cant do that if they’ve got it all in writing.’
that exactly sums up Accountants. I was in similar situation, to illustrate some simple examples, I was recommending clients move from super to pension stage requiring many hours of work, and yet the 19 year old in the SMSF section was having a 5 minute conversation, oblivious to any Centrelink issues. They were setting up SMSF daily at $3K a pop in a 15 minute tax return meeting and moving people out of Balanced options in Australian super into cash in a SMSF. The Accountants would have buy/sell discussions with their SMSF clients. Eventually I left thinking I would go crazy if I stayed. The inequity is crazy.
You have got to be kidding.
Not again…. Fine let me do mum and dad tax returns as part of my service! We could all do that easy enough. And would be a great add on.
no SOA required either…
Financial planners can’t do tax returns because it is too complex (say accountants). And yet people can do it themselves. Yeah that makes sense.
I’ve always said ‘accountancy is a subject made difficult by accountants to keep other people from entering the profession.”
Accountants would generally have a degree and would qualify for an exemption for the tax subject in a Grad Dip, so they could qualify as planners with only 7 subjects of a Grad Dip rather than the full 8 or a full Bachelors degree in financial planning. From that perspective accountants could provide a quicker fix to any skills shortage.
But to suggest that accountants should be given a regulatory carve out to provide advice without proper training or compliance with client’s best interests is totally unacceptable. Accountants may be trusted, but that doesn’t make them trustworthy. Too many accountants have abused that trust to provide inappropriate and highly conflicted advice that has made clients worse off.
Yes, in the process of trying to fix a SMSF for some new clients. It was recommended by their accountant. The same accountant questioned why there would be a benefit of rolling their Industry super into their SMSF because in her words “you couldn’t get better returns than Cbus”. Zero idea about asset allocation…
just stick to unlicensed advice ASIC will continue to ignore you guys….
I am predicting the most commented article in the history of IFA…..
I partly agree with this proposal because accountants are certainly well positioned to provide strategic advice particularly where tax is concerned, however, accountants would definitely need to undertake additional financial planning specific education on the investment, retirement planning, aged care, risk insurance, etc side of things. Yes accountants are certainly trusted and respected by their clients but in my experience they are often misconstrued as being “The Oracle of all things Financial”…..which they are not. In fact, I have clients who are accountants who come to me because I do what they don’t know how to do……on the flip side, whilst I am a 20 year CPA member, I don’t do what an accountant does and so I engage an accountant to do my taxes. The other thing to bear in mind is that accountants charge by the hour just like solicitors or doctors, etc, many at a minimum $300 p.h. which in my experience, many consumers either can’t, or are reluctant to afford anyway, so I’m not convinced bringing accountants into the mix is the magical solution to the growing problem of affordability of advice and shortage of advisers. It’s government regulations on how tangible, logical, sensible personal advice is required to be delivered. It’s the system that needs fixing, not the people in it.
Please do not lure accountants back for the sake of running like in the good old days. Quite a few of them do not respect the regulations in advice. Whoever (accountants included) wants to be in the advice industry must prepare to share the [b]same responsibilities and obligations![/b]
Using a medical analogy, we’ve made it too difficult and too expensive for heart surgeons to perform heart surgery on the average person anymore, so we’re going to let dentists start doing it instead.
Let me guess. Scientiam can provide the AFSL for these accountants, as long as they use their system so Scientiam get a small cut of the pie…
Go long SMSF’s and backdoor accounting degrees for that sweet advice business multiple uplift!
Why are we still beating this drum? If accountants want to provide advice in this area then they can do what all the other financials have done…the study, the exam, etc. The fact, is that don’t want to do the hard yards and spend the money. Let’s not reward people who don’t want to do the work.
…and then advise clients incorrectly because many don’t actually understand the nuances of the industry / profession.
Ex Limited Licensee. I tried to do the right thing and got registered. ASIC just ripped me off blind with fees. (Fees for no service!). I always felt that suitably training Accountants could fill a role in this area. But I am not interested to try again after this last expensive and futile exchange.
The way we make advice “affordable” again is to get rid of these experimental “Annual Fee Renewal Consent” forms on a marketplace, unique forms that do not exist in any nation on earth. This unique but highly INEFFICIENT red tape, imposed by Canberra bureaucrats, makes advice inaccessible to over 1 million Australians. An epic fail yet again.
We tried that.
They haven’t got a clue what they are doing!