Many accountants were left reeling following the 2016 ASIC repeal of the accountant’s exemption. It created serious upheaval for many accountants’ in how they a) provide product advice and b) where they refer clients to ensure they receive the right type of advice for their situation.
The many investment advice scandals has made accountants think twice before referring clients to a financial planner. Despite accountants and financial advisers working in a similar sphere more often than not they operate independently of each other. For an accountant, referring a client off to a financial adviser can be an unknown quantity.
This has created ‘the advice gap’ paradox. Accountants can’t provide SMSF product advice and they’re unsure how to help clients find good advice, particularly on the right investment strategy.
Your clients need advice
The 2017 Vanguard and Investment Trends report found most accountants aren’t planning to obtain a limited license. A growing proportion are considering a relationship with a financial expert instead, however, investment advice isn’t easy to do well. The last thing accountants want is to refer clients to a financial planning firm that could damage valuable relationships.
Accountants face twin concerns for clients who require investment advice. They want clients to get advice in their best interest and also ensure their relationship isn’t tarnished by sending clients to poor quality provider.
For accountants trying to close the advice gap, it’s also important they have an understanding of the advice provided to their clients and how that impacts their tax situation. Typically collaboration between financial planners and accountants in this area has been poor.
The advice gap is an opportunity
The advice gap is an opportunity for accountants to retain and grow clients, particularly for those in the SMSF space.
The Vanguard report found over 277,000 (almost half of all SMSFs) reported having unmet advice needs with investment advice topping the list. A third (31%) of trustees said they need more help selecting and managing their investments.
Out of the total pool of SMSFs only 214,000 used an accountant for tax advice, and of these 60% said they would use accountants for investment advice if they offered it.
Digital technology fills the gap
Accountants are arguably one of the greatest beneficiaries of technologies streamlining business functions that benefit their bottom line. The rise of online investment advisers (aka robo-advice) will be the next tech solution that helps accountants strengthen client relationships and become more valuable and efficient.
Robo-advice helps accountants refer clients to a licensed investment advice provider without losing their relationship or risking their client receiving unsuitable advice.
Companies like Stockspot are filling the advice gap for accountants with hundreds of accountants linked in to the portal. Robo-advice helps accountants retain client relationships because the entire advice, investment and portfolio management process is online. There’s no need to refer a client off to an external provider with limited visibility.
Robo advisers assess if a client should be investing (or paying off debt) and provide a personalised Statement of Advice (SOA). Clients get an investment that reflects their investment horizon, risk capacity and cash-flow needs, which is updated regularly. Clients’ money is invested into sensible long term portfolio of low-cost index funds (ETFs), there’s no conflict of interest because Stockspot doesn't get paid by the product providers.
It negates the pressure for accountants to be licensed as Stockspot provides the advice (like a financial planner would). At the same time accountants have full visibility over the investment strategy so they can provide tax, structuring and compliance advice.
It’s lower risk than a client picking direct shares and provides the opportunity for higher returns than leaving savings in cash.
Most importantly it solves the compliance issues and ensures clients are getting access to sensible investment advice at a fair cost.
Find out more: Stockspot Partner Program for Accountants