The accounting profession represents a large and impressive talent pool for the advice industry but luring accountants in again will take work.
There are around 220,000 accountants in Australia and that number is growing by around 9.2 per cent per annum.
In addition to financial reporting and tax advice, accountants provide services including budgeting and cashflow management, self-managed superannuation fund (SMSF) administration, and business planning. Their knowledge and skills are compatible with financial planning and easily transferrable.
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.
But this idea is not new.
At the turn of the century, thousands of accountants expanded into financial planning, supported by their professional association.
CPA Australia, Chartered Accountants Australia and New Zealand, and the Institute of Public Accountants all established specialist financial planning divisions, offering courses and designations.
Accountant-focused dealer groups like Count Financial, Lonsdale and Premium Wealth Management sprung up.
However, before long, regulatory changes, rising costs and the industry’s reputational issues forced many to retreat.
Admittedly, many of those who left never fully embraced advice; dabbling in it on the side and keeping one foot in both camps. They didn’t get to experience the rewards of running a successful advice business.
But the promise of a more principles-based approach to advice regulation flowing from Treasury’s Quality of Advice Review (QAR) may see accountants pour back into the sector, given many of the factors that originally lured them in remain unchanged.
Financial planning still represents an attractive opportunity for accountants to expand their value proposition and diversify their revenue beyond compliance-based services like checking accounts, lodging tax returns and preparing quarterly BAS statements.
They see their clients getting older, richer and taking on more debt, and they want to help them plan for the future and manage their financial affairs, instead of sending them elsewhere and potentially losing them to an integrated, multidisciplinary professional advisory firm.
Advice also represents an opportunity for accountants to increase the capital value of their business.
Accounting firms are valued at between 0.8 and 1.2 times earnings compared to roughly 2.7 times for financial planning businesses.
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?
With the availability of scalable digital solutions, accountants and advisers can offer low-cost general information services to a large number of clients.
Over time, as a client’s needs increase, they can upskill and provide personal advice in-house or outsource it to a third party.
While the idea of accountants and advisers working closely together has been problematic in the past, as advice transitions to a bona fide profession and historic prejudices and rivalries dissipate, there will be greater collaboration as both professions look for new and better ways to serve their mutual clients.
Before that can happen, there must be regulatory reform.
The current advice regime was built around large institutional product manufacturers and their aligned distribution networks. It was not designed for educated, qualified professionals.
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.
Nigel Baker, founder, Scientiam; financial adviser, Arch Capital
Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.
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