The head of the professional membership body for financial services has reiterated his view that the advice regulatory model should mirror the accounting framework in Australia.
On a new episode of the ifa Show podcast, FINSIA CEO and managing director, Yasser El-Ansary, discussed the group’s recent QAR submission to Treasury, in which it recommended the review and reviewer Michelle Levy “explore the features of the coregulatory model that currently exists within the accounting profession… to determine if the government believes such a model may serve as a valuable guide for the evolution of the regulatory framework in respect of financial advisers in Australia”.
“… the way that it works in the accounting profession is that anyone who is a professional accountant member of Chartered Accountants Australia and New Zealand, or CPA Australia, or a handful of other organisations can access a public practising certificate, which brings with it a range of obligations and conditions that are imposed on those professional accounts,” Mr El-Ansary said.
“Everything from the way in which they must hold certain levels of professional indemnity insurance to ensure that their clients are protected in the event of some misadventure in that particular area, the way in which public practitioners who hold a certificate in the accounting profession must complete a certain volume of continuing professional development on a periodic basis.
“You can think about how that relates in the accounting profession very much to the need to keep abreast of regulatory change, policy change, changes to taxation law… [the accounting model] might serve as a really useful catalyst for at least some thinking to be done by Michelle Levy and the team around whether or not that model might, in fact, have a place in the context of financial advice.”
Mr El-Ansary said the proposal should be considered the heavy regulatory changes put in place in recent years, as well as controversy surrounding current education standards.
He argued that, given the “overlap” of advisers who also work as accountants, the market would be able to adapt to the change.
“We should turn our mind to the option to borrow some of this experience, some of this thinking and the framework that exists for the accounting profession, and at least have a debate about it,” he said.
It comes after Scientiam head Nigel Baker argued in a recent opinion piece published on ifa 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.
“Demand for general information is also strong. Who better to educate people on basic financial principles than their trusty accountant?”
Listen to the full podcast with Mr El-Ansary here.
Until accountants (in general) understand that buying a luxury car to get a tax deduction is not sound investment advice, I don’t think accountants (in general) should be giving financial advice…
Licenced Financial Adviser/Planner advice = ~80 page comprehensive SoA . CPA or equivalent Accountant advice = back of envelope. Herein lies the problem.
Somewhere between these extremes lies the solution.
The “accounting framework” may have worked well for accountants, but not for consumers. Weak regulation of accountants has led to inappropriate recommendations of SMSFs and property investments, that are designed to generate more accounting work rather than better client outcomes.
Consumers need a goldilocks regulatory environment that is somewhere between the lettuce leaf waved at accountants and the nuclear arsenal used against financial planners.
But because it is too hard to sue an accountant no legal action is taken against them and therefore ASIC believe it is all good.
Conceptually, yes the framework would be preferable to the direct to Regulator regime currently in place however, the human condition is the number one issue with the model.
There are definitely some elements that work well but there are also some that don’t as, after all, the accounting bodies don’t exist without membership fees and therein lies an inherent conflict of interest.
The recent reset of the requirements for SMSF Auditors to demand actual independence between the account preparation and the independent audit is a good worked example. Why would this be necessary if the system worked as it should? Conflicts of interest exist everywhere and the prioritisation of personal/business interests over the client are more likely to occur where there isn’t rigorous oversight.
There is a need for, either ASIC to change its regulatory approach, or perhaps, a professional body that itself had accountability to ASIC, for example. The number one issue the current structure of financial advice has is the lack of regulator oversight. The AAT provides a great oversight of ATO decision making and the review decisions inform their approach. Also, ATO consults with stakeholders to try and build workable guidance and processes. ASIC has none of this and is therefore, a law unto itself. You couldn’t be blamed for thinking that the aim of many in ASIC is to show case their lawyering skills at all costs, without consideration of the purpose of the financial services law – to protect consumers. The number one protection for consumers is not layer upon layer of disclosure but clear, concise, understandable information in order for them to make informed decisions. Consumers are not stupid, they need empowerment to make informed decisions and the current Gordian knot of regulation does nothing to produce that result.
Based on this line of thought, financial planners should be able to do everything an accountant currently does as well. The only difference is financial planners aren’t so arrogant to expect to do a completely different job without the relevant training. Accountants should stick to giving unlicensed financial advice, this has been going on for many years, and ASIC has never do one thing to stop this illegal practice.
No, no, no and no. Unless an accounted has jumped through ALL the hurdles (and is appropriately licensed), then they should not be allowed anywhere near financial advice. Otherwise, what is the point in of the hurdles in the first place.