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CPA Advice: Factors to consider

There’s a huge difference between running a professional body and operating an Australian Financial Services Licence (AFSL), so will the new CPA Advice offer stack up?

Insights Greg Holman 27 April 2016
— 3 minute read

It’s likely that some accountants who opt for CPA Australia’s new dealer group will need to change the way they run their practice in order to meet the group’s proposed guidelines including the requirement for authorised representatives to comply with Section 923A of the Corporations Act.


Section 923A contains the infamous clause which prohibits advisers and accountants from describing themselves as “independent” or “unbiased” if they accept commissions or any other benefit from a product provider.

Under Section 923A, accountants who refer clients to a mortgage broker or financial adviser for lending or insurance advice and in turn receive a share of any commission earned – as is standard industry practice and legally acceptable – must either rebate that fee back to the broker or adviser, or charge a fee for those services.

The problem for accountants, as advisers have already discovered, is that the majority of consumers won’t pay a flat or hourly fee for lending or insurance services which they can otherwise get from an experienced mortgage broker without putting their hand in their pocket.

But it’s not only CPA Advice’s strict rules that may work against it.

It’s the professional body’s unapologetic decision to set up a licensee, which will ultimately authorise practices to compete with other members, coupled with a superior attitude that fails to acknowledge that some CPAs have also been involved in scandals and fraud.

CPA Australia has repeatedly said its decision to launch a national dealer group was in response to a lack of public trust in the financial planning profession in the wake of numerous advice scandals.

Advisers may not be perfect but neither are CPAs.

There are good and bad workers in every industry and profession.

Drilling down on price

On the surface, CPA Advice’s pricing seems standard. A limited authority will cost $695 per month or $8,340 per annum while a full authority will cost $1,760 per month or $21,120 per annum.

That’s on par with what many institutionally owned licensees charge but significantly under what the country’s top non-independently owned licensees charge. Given it’s widely accepted that most institutionally owned dealers don’t make a profit (or even break-even) from licensing fees but recover costs by channelling client monies into products they derive a commercial benefit from, it’ll be interesting to see whether CPA Advice is a sustainable proposition.

If it incurs losses, some CPA members may not feel comfortable with their membership fees being used to prop up a subsidiary that effectively competes with them.

Viability is important if CPA Advice plans to be around for a long time to support advisers and their clients. It’s also critical if they hope to continuously enhance their offer to keep up with advisers' changing demands.

By their nature, accountants are cost conscious. It comes with the territory. However, price shouldn’t be the determining factor when deciding on a licensee. Price is critical but it’s only valid when evaluating two similar, comparable offerings given there’s a lot of variation from licensee to licensee.

For example, some licensing models don’t include paraplanning, marketing or PI insurance. Some licensees provide all advice authorisations including credit while others charge an additional fee for credit licensing. It’s also important to consider the resources and staff available to advisers. A well-resourced licensee with an experienced research team, state-based practice development managers, extensive and regular training courses, and a succession planning program, will likely be more expensive but also add greater value.

When deciding on a licensing solution, accountants should partner with a dealer group that can help them grow and manage their ongoing legal obligations through coaching, mentoring and the provision of compliance, practice management and client engagement tools. This is in addition to traditional dealer services like a robust advice and investment framework, research and an APL, education and training, revenue collection and processing and ongoing support.

When taking a punt on a new licensee, accountants must have total confidence that the team behind it has a proven track record of delivering improved client outcomes. It’s not enough for a licensee to express a genuine and heartfelt commitment to serving the best interests of clients.

CPA Advice: Factors to consider
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Greg Holman

Greg Holman

Greg Holman (FCPA) formed Holman’s Accounting Group in Noosa 21 years ago. His firm was listed by BRW as one of the top 100 accounting firms in Australia by revenue and one of the top 10 fastest growing. In the late 1990s, Greg was joined by Rob McGregor and together they established an award-winning financial planning business. In 2012 they sold their accounting firm and launched GPS Wealth Ltd – an AFSL designed for accounting firms looking to embrace financial services as a key service offering. GPS Wealth was recently named Dealer Group of the Year by AccountantsDaily's sister publication ifa. It is also the 2015 CoreData Licensee of the Year.