They want to continue preparing and lodging BAS and tax returns and providing tax and structuring advice, ignoring the fact that the ‘hackwork’ traditionally performed by accountants is increasingly being done in-house by bookkeepers using online accounting software like Xero and MYOB.
While the majority of companies and individuals still rely on an accountant to lodge their annual tax return (partly because registered tax agents can wangle an extension), it’s clear that accountants need to get creative and expand their value proposition to combat digital disruption and build profitable, sustainable businesses.
Rather than fear changes to the profession, practices should encourage clients who want to do more of the grunt work to do it because that will free accountants up to spend more time delivering new, higher-value services.
In the future, the most valued (and valuable) practices will be those that not only help clients legally minimise their tax but help them to protect their assets using different company and trust structures; maximise and grow business revenue and profitability; and build and protect their wealth.
The first step towards building a holistic accounting and advisory firm with a relevant and distinct value proposition is to become qualified and licensed to provide a range of financial services.
Historically, accountants have been able to provide non-product advice and advice on the establishment of self-managed super funds without holding an AFSL or being authorised by an AFSL, under the accountants’ exemption in the Corporations Act.
But from 1 July, when the accountants’ exemption is repealed, those who want to continue providing non-product strategic advice must either gain a limited or full licence, or limited or full authority. Alternatively, they can form a referral partnership with a licensed adviser (either internal or external) and oversee the provision of complementary financial services, ensuring they remain their clients' primary, trusted adviser.
With the regulator’s deadline fast approaching, many savvy accountants have already locked in a licensing solution but many are still undecided.
They effectively have three months left to act if they want to continue providing strategic advice after 1 July.
Whether they move quickly to become qualified and licensed to provide advice, spurred by regulatory reform, or choose to act later, forced by digital disruptive technologies, it’s highly likely many more accountants will conclude that they must expand their value proposition and diversify their revenue to hang onto existing clients and win new ones.
For those who intend to retire and sell their practices in the next five to 10 years, they’ll be able to command a significantly higher sale price by introducing higher-value services and growing their revenue.
The average suburban accounting firm in Australia charges around $200-$300 to prepare and lodge a simple tax return; however, they may be able to lift that fee to $400-$550 by adding insurance advice. That fee may double or triple again if they’re able to offer coaching on saving, budgeting and cash flow management.
It’s easy to see how a client paying $300 for a tax return can, over time, become a client paying over $2,000 per annum for accounting services and strategic advice on insurance, superannuation and investments.
From a valuation perspective, a traditional accounting practice – which tends to be valued at a dollar-for-dollar gross fees basis – can ramp up its sale price given financial planning businesses typically sell for three times the recurring revenue.
None of this is possible for those who choose not to get licensed. Their future is limited.