As reported by ifa, CPA Australia Advice has failed to gain significant traction despite receiving 600 expressions of interest from advisers and advice groups and investing millions into the business.
It is interesting to ponder the factors leading to the failure of the CPA advice arm, but maybe the real question should be ‘what differentiates a CPA financial adviser from that of any other dealer group?’
On face value, the idea of a financial planner aligned with CPA Australia appears to offer clients a service that could simplify a client’s financial life.
The potential of synergy between forward-looking strategy accounted for by an accountant when optimising the client’s tax returns, insurances and superannuation.
For business owners, accountants could account for their personal strategies in the business and tax planning processes.
CPA calls out the following aspects of its model as “game-changers” in personal financial advice:
- A focus on what’s right for the person seeking advice – not what’s financially beneficial for the adviser;
- Independence of advice; and
- Community standing and trust in accountants.
We argue that the first point is the only one with substance.
While very important goals, ‘independence of advice’ and ‘trust’ are hardly “game-changers” of personal financial advice in Australia.
Either way, is there sufficient benefit to an adviser considering joining the CPA Australia Adviser Group?
More importantly, is this sufficient benefit for a client to use a CPA Australia Adviser?
It is to be noted there are a few exceptions, but by and large accountants are not seen as interested in a client’s personal financial life except at tax time – it is messy.
Let’s face it, accountants, traditionally, are historians, accounting for past activities rather than playing an active role in a client’s personal financial life. This changes somewhat when clients are also business owners; with cash flow forecasting needed for financing; or where significant personal assets are tied up in businesses or self-managed super funds.
Getting involved in personal financial strategy is a big bridge for some accountants to build. While not impossible, it is a hurdle nonetheless
The second challenge for accountants is offering a “fee for service advice model”. It is arguable that accountants struggle with this concept even now.
How many accountants sell advice only without product?
Their products are superannuation funds, tax returns, profit and loss statements, ASIC returns. Some brave accountants tackle business planning and cash flow forecasting, but these are hard pieces to sell outside of bank finance applications.
Why? Because it falls into ‘advice without product’.
The real game-changer
Advisers (whether they are accountants or financial planners) will continue to struggle to truly transition to fee for service that is independent of product advice unless they get knee deep into a client’s personal financial life.
Advice focused on really solving the challenges that are holding their clients back from making real financial progress.
There is a great opportunity for financial planners and accountant advisers who are:
- Focused on advice that improved the everyday financial lives of ordinary Australians;
- Actually strategic – drilling deep into what is stopping clients from getting ahead;
- Utilising technology to track, manage and report on the cashflow outcomes created from this overall advice process;
- Don’t shy away from the “pre-advice” challenges, but assisted clients to remove hurdles, like debt and spending habits;
- Providing their clients with outsourced management of budget and cashflows, to lift financial stress; and
- Providing their clients with outsourced ongoing coaching and structure designed to manage spending, and support clients over the long-term.
A service such as the above would truly offer differentiation from what is largely offered in the advice market and would offer great opportunities to clients, advisers, CPA Australia and its partners.
For CPA Australia’s financial planning arm to succeed, they really do need to come up with a value proposition that differentiates them from the rest of the financial planning market. Offering the same services that are already available is not doing this.
Australians are in desperate need of assistance in relation to their everyday finances. Massive numbers of people are in financial stress, and there are even more who will be should interest rates rise. For a financial planning group to be struggling amid all of this opportunity indicates to us that their focus is still not in the right place.
Bill Butler wants to help financial advisers to solve this problem and enact the real game change. We would welcome an audience with Alex Malley, or any member of the CPA concerned with the CPA Australia financial planning arm’s direction, and of course we wholeheartedly welcome discussion with strategic financial planners ready to tackle this messy challenge.
Stephen Mitchell is the business development manager at Bill Butler
I’m a CPA and an adviser who was looking at changing licensees. I contacted CPA Australia about possibly joining them six months ago and was very unimpressed by their first ports of call. Calls weren’t returned for 6 weeks, I was told they were basically getting information and would get back to me when they were more organised. Seemed the whole idea was an Alex Malley thought bubble rather than a group actually ready to go. If others had similar experiences then this may explain why more accountants haven’t joined CPA Advisory.
Accountants are qualified to give tax advice
Financial planners are qualified to give strategic financial advice
Why would you want to cross over to a specialisation you know very little about and wait for an impending ASIC audit.
Secondly you don’t just set up a dealer group without first having the structures and capabilities in place such as compliance, governance, monitoring and audit, on-boarding, due diligence etc.
This means first mastering the capability piece by having the right people in place with the knowledge to set the structures up and provide the support mechanisms for advisers entering your practice.
If you are thinking of becoming an adviser these are the norms that you would expect from your dealer group in order to give you peace of mind that you will be compliant as you attempt to make the cross over.
If you are an existing external adviser thinking about joining another dealer group then there has to be a number of REAL Game changers or differentiators that make the dealer group stand head and shoulders above the rest/
Until you master the above, you will find achieving scale difficult, which will unfortunately mean losses to your bottom line for some time to come.
Stephen, while I would agree with you that financial advice needs a a far deeper understanding of the clients needs I think you are missing some fairly big elephants in the room. Why are accountants hesitant to take ARs.
Firstly accountability, many accountants are technically able to provide advice but rarely want to put that advice in writing. Currently an accountant can provide an opinion but is not responsible if a Trustee does not follow through on this advice. Advisers do not have this luxury. Any advice they give has to be in writing and their PI is at risk. Ask an accountant if they want the same responsibility as the trustees of the funds they advise on?
Secondly, SMSFs are to all intents and purposes an acct’s proprietary product. You first point ‘A focus on what’s right for the person seeking advice – not what’s financially beneficial for the adviser’ falls at this hurdle. By recommending their own product (an SMSF) they are are focused on their practice not the client. It could be the right vehicle for the client but are they the ‘best’ practice to provide that solution or are other firms better equipped and resourced.
Advisers are meant to look at the alternatives and provide a solution that is in the clients best interests. I don’t see too many accountants’ recommending that the client goes down the road to a firm that has a better SMSF solution?
Anyone who runs a license understands what a huge risk there is in adding large numbers of advisers. I would argue the CPA is lucky the take up has been so small.
Totally agree Paul. Another thing you rarely see accountants do is telling their clients that an SMSF is not appropriate or necessary at all for their situation. Very few of the hundreds of thousands of Australians with SMSFs are better off as a result. The reason they “chose” an SMSF is because their accountant gave them conflicted, undocumented, personal advice to do so.
Totally agree Paul. I’ve worked as an employed planner inside an accounting firm. In one of the first meetings I had with one of the partners he gave the clients some pretty heavy structuring and tax advice, and then i discussed super & insurance with them. I told the clients that i’d be back to them in a fortnight with their financial plan, our recommendations and research. After they left i asked the partner if he would do something similar – ie; provide them with a written summary of his advice. His response? “No way. You get sued doing stuff like that. If something happens i’ll tell them that it’s because they implemented it differently to what i said. Cant say that if it’s in writing!” . The ‘profession’ at work…
It’s failing because for years accountants have given verbal advice without the need of a licence to do so. Even though the regulations have changed, they haven’t, and aren’t willing to. Many accountants I speak to continue to provide personal advice, never in the form of a statement of advice, and simply think the law shouldn’t apply to them. If ASIC was truly serious they would be shadow shopping and publicly shaming accountants giving unlicensed financial advice. They won’t because Medcraft’s name is attached to the launch the failing CPA dealer group. Some would call this a conflict of interest.
spot on researcher, accountants have giving so much AFSL advice over the years without a single piece of AFSL compliance and way, way, way beyond the old accountants exemption. Shock horror now they are being asked to do AFSL compliance and they can’t believe why.
ASIC should definitely be broadening it’s scope of shopping accountants, unlicensed and also licensed that continue to provide AFSL advice with zero AFSL compliance.
As an accountant I tell people everyone is setting up a SMSF and they need to take control. After 3 years of saying this, in our compulsory fifteen minute tax return meeting, one day they finally come to me and say “”hey I want to set up a SMSF, hey I need to take control””.. I then say it’s your choice not mine & here’s your trust deed and I want $4,000 a year. The reasons it’s failing is because with accountants it’s always the clients decision and you don’t need to be licensed to take or follow a clients instructions. It’s always there decision to buy those shares, it’s there decision to set up the SMSF and roll out their industry super fund, it’s their decision blah blah blah.. oh I’m not an accountant just jealous that one set of rules apply to them another to another group of people. Maybe that’s why it’s failed.
“their”
Great article Stephen. The opportunity to help clients tackle ‘the things holding them back’ is huge. Imagine if the accountant was part of the solution to things like active debt reduction, goal planning and expense management – if they don’t want to play in this space, refer to the emerging group of strategic advisers who would love to help clients like this. We are out there!
One comment stood out in this document, the need to drill down and really know the client. believe it or not, this one aspect is the foundation of advice. Know your client- this cannot occur if you only touch the surface. As an accountant or adviser, miss this aspect and you are fodder for the regulator. The real issues within planning and advice are being clouded by so much “” noise “”. Advice groups in the main do have a strong focus and perform quite well. Sorry mate, this article was so negative, where are the positives. Planning is ALL about strategy and active review. product sales are a historic and on going fail.
the sooner a united positive cohesion occurs, the better for all. one last important aspect for all- stick with what you do best and know best- don’t chase the bucks.
No, the failure of CPA Advice is much more simple that that. They didn’t do their homework. If they did, they would have realised very few financial planners or accountants need to use the term ‘independent’. It is a nice word, but it means very little when your clients have already built trust in your advice over many years. As they say, actions speak louder than words. So why pay a premium for an inexperienced licensee when the only point of difference is irrelevant?
Agree Ben, and also the fact that the transition into a truly ‘advice’ offering firm (warts and all, compliments of the mountains of compliance and documentation it involves), is far harder than the CPA merited or in reality, than any sane CPA practitioner desires. There’s no miracle pill to make it easy, (more efficient yes, easy no) and accountants who are short on time anyway generally steer clear and may not want the financial risk to employ and set up a separate FP arm. (Besides, reality is that more than a small portion of CPA’s will continue doing for some time yet what they have done all their professional life to date, helping clients make decisions via their discussions only).
The experienced accounting firms with mature client books know how much work it takes to have a good FP service offer. The issue is around pricing v licensee quality, and that will always be there. They would not trade that away on an inexperienced licensee just to use the word ‘independent’. You still need to use products at the end of the day. Where’s your research and product team? Who sits in quality control? If you don’t use products its like a doctor who can’t prescribe medication. Incredibly naive IMO.