Speaking to Accountants Daily, Investment Trends senior analyst King Loong Choi said 51 per cent of Australians had indicated that they had unmet advice needs, with 33 per cent indicating that they would turn to their tax accountant, and a further 23 per cent who would turn to a licensed accountant to meet those needs.
However, a survey by Chartered Accountants Australia and New Zealand (CA ANZ) last month revealed that 60 per cent of accountants providing financial advice will drop the offering if the federal government’s incoming education regulations pass in their current form.
The host of new education requirements, set by the Financial Adviser Standards and Ethics Authority (FASEA), will be imposed on existing and new accountants and advisers who provide financial advice by 2024.
Many accounting-related degrees are listed as related degrees, not approved degrees, under the new standards. This means accountants eligible for the transitional arrangements will need to complete a bridging course of up to three units of study to meet the new standards. For some, including those with postgraduate qualifications, this will mean spending thousands on extra training.
Mr Choi said, “There’s an interesting dynamic in that there are a lot of people out there who will turn to an accountant for advice but the really interesting question that starts to raise is that if these accountants decide not go down the path of getting a full AFSL, then what are these clients going to do next?
“What you may find is that these clients may take two different routes, they may either turn to a financial planner or two, if they can’t turn to an accountant then perhaps they may not turn to anyone at all for their advice.”
CA ANZ group executive, Simon Grant highlighted the rising mismatch in client expectations versus the market the new standards are creating, noting that clients were set to lose out in the long run.
“We have a royal commission showing Australians that much of the advice provided by a vertically integrated system has been poor, to say the least,” said Mr Grant.
“Yet we have a body of professionals… who are some of the most trusted advisers in Australia, being forced out of the industry due to additional proposed new study requirements. There seems to be a mismatch.”
Where do the clients go?
Verante Financial Planning director and chair of the SMSF Association’s NSW Chapter Liam Shorte fears that if accountants exit the advice space, complex matters like superannuation will go un-advised.
“Because of the complex nature of superannuation, if accountants choose not give advice then clients may or may not choose not to seek advice elsewhere,” said Mr Shorte.
“Where this involves issues with Total Super Balance or TBAR reporting then the accountant will have to insist trustees make a decision or seek advice.
“However, for other issues like starting or stopping a pension, consolidating accounts, reviewing insurances, rebalancing investments then clients may be left without advice. While the clients may feel ok with doing nothing, it is their beneficiaries later who may be the ones who question why advice was not offered or recommended by the accountant who was the trusted adviser. So in these cases it is always important for the accountant to document in a file note that they did recommend the client seek advice.”
Further, Mr Shorte encouraged accountants choosing to leave the advice space to consider partnering with a financial planner to ensure clients remain appropriately advised.
“Going forward if accountants choose not to be active in the advice space then they really need to decide if they will partner with a financial planner to provide an advice service or totally exclude this service. The danger is that if the clients are left to find an adviser on their own that they may end up with an adviser tied to another administration offer and you risk losing the client,” said Mr Shorte.
“I would recommend that by 2021 you have a solution in place so that your clients have access to an advice option whether delivered personally by someone licensed in your firm or through a chosen financial planning partner with SMSF specialised accreditation.
“You need to choose carefully as with the changing landscape of advice, the financial planner will need to not only understand SMSFs but also discretionary and unit trusts as clients look for alternative wealth creation opportunities. Done well this could deliver significant work back to the accounting partner.”