Accountants providing financial advice in 2019 and beyond need to be across sweeping changes to mandatory education, as the official transition period kicks off in January. Accountants Daily takes a deep dive into the ongoing frictions, the opportunities, and what’s still to come for accountants holding AFSLs.
The state of play
The new education requirements apply to anyone operating under an AFSL - full or limited - and are part of the federal government’s sweeping push to improve the quality of financial advice to Australian consumers.
Accountants who were on ASIC’s financial adviser register between 2016 and 2018 qualify for transitional arrangements, but will still need to meet a spate of new conditions by 2024.
The Financial Adviser Standards and Ethics Authority (FASEA), which is setting the standards for the federal government, accepts prior learning in the form of approved and related bachelor degrees.
Most accountants will sit in the ‘relevant degree’ category, meaning they will need to complete up to three tertiary-level units of study to comply.
By 2021, existing advisers will also have to sit a 3.5-hour exam, at a cost of $540 a go.
There are also new ongoing CPD requirements, which are currently set at 40 hours annually. When combined with their existing requirements of their professional body, experts estimate accountants providing advice will need to complete up to 60 hours of CPD annually in some cases
Fit for purpose?
Education is in the fabric of the accounting profession. Tertiary qualifications, professional designations and lifelong learning in the form of CPD are not a selling point for most accountants, they are a base-level expectation.
Throughout 2018, accountants in droves told Accountants Daily they support and welcome the federal government’s intention to use education as a driver to improve the quality of advice for Australian consumers.
However, accountants and industry stakeholders alike fear the way the standards have been set don’t acknowledge a long-standing feature of the advice landscape, and one that the government and regulators often miss: accountants and financial advisers are different beasts.
Sweeping reforms for accountants and financial advisers often skate over fundamental differences. In this case, it’s that the way accountants and financial planners operate under the AFSL regime is not the same.
An example: The limited AFSL was brought in to replace the accountants exemption, and allows for the provision of basic advice services. It is the domain of accountants.
Existing guidance for the incoming education changes do not distinguish between an accountant operating under a full versus a limited AFSL. In effect, this means an accountant holding a limited AFSL will be completing some training as a financial adviser providing full advice services, and completing education they won’t be using in practice.
Further, to pass the mandatory exam, accountants operating under a limited AFSL will also have to study some materials that are beyond the scope of their licence conditions.
Completing education that accountants can’t use with clients does not speak to the policy intent of raising the quality of financial advice, and distracts from the well-intended mission of FASEA and the federal government.
The bright side
Industry veterans who have seen decades of change are calm in the knowledge that accountants have fared significant regulatory and legislative upheaval, and through it all, continue to hold the trusted adviser mantle.
Some, like Hayes Knight director and Knowledge Shop founder Greg Hayes, see an opportunity for accountants to claim the financial advice space. The opportunity of financial planning has often been spruiked to accountants, but this time, Mr Hayes sees market forces working in favour of the accounting profession.
“We are going to see a contraction in the supply of advice at the same time as we’re going to see an increasing demand because of the size of the market growing,” said Mr Hayes, during an Accountants Daily Live webcast.
In fact, Mr Hayes has been disappointed by some of the commentary circulating in the profession, which fails to address market opportunities.
“I think the focus has been around the nitty gritty stuff like we’ve got to do an exam, we’ve got to do CPD, I think there needs to be a discussion to lift your eyes up and have a look at this opportunity.
“If accountants are going to stake themselves in this market, they’ve been given preferential positioning relative to the broader advice market – there’s this opportunity sitting there if they want to take it,” he added.
“None of us necessarily likes change but we need to accept that and whilst this is being worked through, look at the bigger picture.”
“The accounting profession is the natural provider for advice in this space. I look at this and think it is an enormous opportunity for accountants,” he said.
Indeed, Accountants Daily sister publication ifa reported earlier this year 75.6 per cent of 3,536 straw poll respondents would leave the industry after the introduction of FASEA’s mandatory education standards.
Others like Smithink founder David Smith - who formerly held positions as PKF partner, CA ANZ president and director at Countplus - predict a spike in accounting firms taking on white-labelled financial planning services.
“It achieves an opportunity for the accountant to provide a broad-based service that’s all under their brand. The planner appears, for all intents and purposes, to be a colleague of the accounting partner. It satisfies all the needs of the accounting firm without requiring them to actually go through and provide the services and have to have all the compliance burden that a financial planning business requires,” Mr Smith said.
“There are only a handful providing these services at the moment but I think we will find over time that people will try and develop these different ways to help accounting firms provide financial planning services.”
As with any period of change, there is friction and there is opportunity for the profession. Accountants Daily will continue to report both, from the point of view of accountants, to ensure their voices and experiences are heard and understood.
To learn more, watch Accountants Daily Live's free webcast on the incoming education changes.
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