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
Almost to a single one, I have found accountants providing advice that consisted of setting up an SMSF with a LRBA for even the lowest balances. It did not represent value to the client but the accountant got an uplift in returns. Self interest always and they cannot stand to see anyone else make an honest quid. Mostly they would do their utmost to seduce a client from a real financial planner and then act like an accessory after the fact or recommending dodgy agriculture investments. Stay away.
Accountants make up the bulk of errors and inappropriate advice (as observed in assurance, compliance, and remediation) as a function of incompetence because they don’t understand fundamental principles of finance yet assume they know better.
If they want to go back to uni and can complete a relevant masters or do the required subjects to achieve a double bachelors then fine, but otherwise this would be a backwards step for financial planning.
HOW CAN ONE GIVE FINANCIAL ADVICE WITHOUT UNDERSTANDING CAPITAL GAINS TAX , INCOME TAX , AND GST.ACCOUNTANTS CAN BE LIKE DOCTORS. WE CAN BE GP’s AND REFER CLIENTS.
The best financial planners I’ve dealt with were Chartered-Qualified accountants first. There is little doubt the educational requirements by CAANZ/CPA/IPA brought the standards up for that profession. FP only got this by legislative mandate. As a result most flew the coop. Good luck to those who are left. You deserve the rewards for the hard yards you’ve endured. I won’t be lured back. The limited license was a failure. If your profession doesn’t have enough to service the public of Australia, then the Government can introduce fee free services like they have done for taxation services in various centres around the Country. ABC wrote of one in Darwin this past week.
Remove red tape so anyone with relevant qualifications can recommend basic things like $27.5k personal concessional contributions, withdrawal and recontribution for estate planning, starting pensions after age 65, etc. That removes red tape for Fin Planners and lets accountants do things they can do well.
So agreeing with those saying have same obligations – just remove red tape on the basics for everyone.
There’ll always be accountants who are incompetent, etc, but that’s the same for every industry.
Have some minimum education and/or a basic short exam to weed out the clowns and have a system that’s inexpensive for the public for the basics with less red tape for all.
What is a “relevant qualification? Personally anyone who can read could recommend a personal concessional contribution. This sounds like the FASEA saga all over again.
Years ago I presented an income protection session to accountants who occasionally dabbled in life insurance advice. They were prone to recommending max 5 year benefit periods to show the client how they could save the client money.
I explained the trap where a 2 year period of disability was followed by a return to work for (say) five months, only for the same medical problem to reappear and put the insured off for 5 more years. If the client held a FIVE YEAR BENEFIT PERIOD, and the same condition re-occurred within 6 months of the return-to-work , a fresh WAITING PERIOD was not applied.
However, all periods of claim payment would be added together for the purposes of calculating the maximum benefit period, e.g. if the benefit period was 5 years and the insured was initially disabled for 2 years, then the maximum the insured could claim because of the recurrent disability clause would be an additional 3 years ONLY.
I watched the colour drain from their faces as they realized the extent of their liability. They had been seduced by the temptation of cheaper premiums for their clients, never asking how the Reoccurrence Rules worked with 2 and 5 year benefit Periods. A little learning ( and a tinge of greed) is a dangerous thing!
“ideally positioned to offer personal advice and general information” really are they …..
Didn’t read it all but accountants can already give advice, they just need to be licensed and follow the same rules. Until that becomes easier and less risky then simply giving advice unlicensed, like the majority of accountants currently do, they won’t become licensed financial planners. Realistically I can’t blame them for taking the easier, less risky and more profitable approach.
In my experience, very few suburban accounts even understand superannuation, let alone advise on it. They would rather clients take out a lease on high end cars in order to obtain a tax deductions, rather than that same person make concessional super contributions. I see this time and time again. Don’t even start me on low balance SMSF’s.
Some of the worst adviser I have seen have been accountants who think they are the font of all knowledge, not used to putting advice in writing and like our politicians unable to distinguish a conflict of interest…
Please do not lure accountants back for the sake of running like in the good old days. Whoever (accountants included) wants to be in the advice industry must prepare to share the [b]same responsibilities and obligations[/b]!