Following the Commonwealth Bank scandal, public attitude towards financial planners are at a low. However, the core service provided by financial planners is still very much in need as there is increasing pressure for Australians to stay in the workforce and fund their subsequent retirement without recourse to government benefits.
Australians added about $100 billion of their hard-earned cash into the superannuation system in 2014. Everyone should have access to quality advice to achieve the optimal investment portfolio that supports them throughout their retirement.
With the Future of Financial Advice (FOFA) changes, which have been much talked about in the media and in parliament, we will see the emergence of new business models which do not rely on conflicted remuneration and product sales to survive. Despite the complaints from large institutions that it is not financially feasible, I do not agree. I believe that clients are increasingly aware and will demand that those providing them with advice about how to invest their money shift to a business model that promotes independence between advisers and financial products, and economic alignment between advisers and clients. In practice, this will mean that advisers do NOT take commission from financial products and instead charge their clients a fee for service (in the same way that doctors and lawyers do).
This shift represents a really compelling opportunity for accountants to enter the market, providing quality investment advice and expanding revenue along the way.
Accountants offering financial planning services have a competitive advantage in the new era of financial planning:
1. You already have a network for clients who need the service: most accountants I speak to have a client portfolio of 50–100 clients. Every client has superannuation, and is a potential financial planning client. Many established clients also have a property or investment property so [they have] a basic awareness and willingness to invest. For accountants looking after a large number of small businesses, this number is even larger, as businesses may have multiple owners/ directors.
2. You have a trusted relationship with these clients: the relationship of trust between accountants and clients has remained very strong over a long period of time, quite removed from the deterioration experienced by financial planners and finance firms. Trust is the key ingredient in winning clients in financial planning. You have demonstrated a track record of acting in the interest of your clients in the accounting and tax advice you have provided in the past. There is no reason you cannot leverage that trust into financial planning.
3. Your clients are used to paying you a fee for service: the fee-for-service model is a completely new form of client relationship for existing financial planners. Transitioning to the model will be challenging for them as they seek to demonstrate their value to clients. However, as accountants, most (if not all) your clients will understand this model in their engagement with you.
4. You have professional qualifications and a university degree: an outcome of the next anticipated round of reforms is that financial planners will be required to be degree qualified. Not all of the existing financial planners fall into this category, but as an accountant, almost 100 per cent of you would fit the bill.
The market is screaming out for trusted financial planners to provide valuable advice to their clients. As accountants, this is a very logical business opportunity that can expand and diversify your revenue base, deepen relationship with clients and improve the valuation of your practice.
With big changes and challenges to your existing business models through the rise of cloud accounting, this is a very promising opportunity for you to explore.
Sophie Gerber, director, Sophie Grace
[quote name=”Leo]
I’m not sure that merely working within the law should be the aim. Perhaps a higher goal of providing appropriate advice to the client might be a more noble goal.[/quote]
I would have thought working within the law would be the first and primary aim.
This is not an “the ends justifies the means” situation or some holy crusade.
I doubt that in the field of superannuation and financial planning that illegal methods can ever be “appropriate advice”.
Lets not lose perspective. Ending world poverty is a “noble goal”, finding a legal loophole to drop a few more thousand dollars into a lower taxed environment is not.
[quote name=”Ralph”][quote name=”Terry Hannagan”] We have just helped a doctor and his wife who were “sold” an SMSF some years ago by their accountant who then left them to it-the accountant was unable to answer the most basic queries. I put it to you that a fair number of SMSF’s set up by accountants over the years were not done with the clients best interest at heart.[/quote]
So the client had a SMSF set up and the accountant did not offer financial planning advice. Which legally he wasn’t allowed to do anyway. So your beef is basically that because the accountant did NOT break the law he was remiss!
Perhaps that is the attitude which explains why the financial planning industry is held in such low regard and accountants are more trusted.[/quote]
I’m not sure that merely working within the law should be the aim. Perhaps a higher goal of providing appropriate advice to the client might be a more noble goal.
Sorry Ralph. In your haste to leap to the defence of the accountant you have assumed that “the most basic queries” were financial advice issues-they were admin issues Ralph. I think you will find that most Financial Advisers are well aware of the legalities regarding the provision of financial advice.Is this the best you can do-I notice you had no comment to make regarding the other issues raised!
[quote name=”Terry Hannagan”] We have just helped a doctor and his wife who were “sold” an SMSF some years ago by their accountant who then left them to it-the accountant was unable to answer the most basic queries. I put it to you that a fair number of SMSF’s set up by accountants over the years were not done with the clients best interest at heart.[/quote]
So the client had a SMSF set up and the accountant did not offer financial planning advice. Which legally he wasn’t allowed to do anyway. So your beef is basically that because the accountant did NOT break the law he was remiss!
Perhaps that is the attitude which explains why the financial planning industry is held in such low regard and accountants are more trusted.
in principle the article title is correct. In practise, its the lack of ability to execute and take practical advantage of that position where it falls down for our tax/accounting professional colleagues. Opportunity is undoubted, but it is a special breed of individual that will successfully execute and therefore prosper.
All comments so far have validity as does the author’s premise for the article…but, as a raw analogy, it does not automatically follow that because one is an excellent sports team coach, one can turn their hand to being a counsellor or psychologist…..that is to say, if as a coach of a footy team with several types of personalities to deal with can do so with a level of success, its not a given that the same person will be able to counsel/mentor each individual with that same success…..
Another way to put it – do the vocation you are best at and want to perform to your best. Being 100% at more than 1 thing is nigh on impossible.
Interesting article based on a biased view.
Lets be even handed here. We have just helped a doctor and his wife who were “sold” an SMSF some years ago by their accountant who then left them to it-the accountant was unable to answer the most basic queries. I put it to you that a fair number of SMSF’s set up by accountants over the years were not done with the clients best interest at heart eg; small balances, funds left in cash for years etc etc.I once suggested to an accountant that he had been remiss in advising a large client-he just shrugged his shoulders and said he didn’t have a problem as the client signs a waiver absolving the accountant! There is also a recent case where an individual was banned from being a Financial Planner but was allowed to continue practising as an accountant endorsed by the CPA and Tax Practitioners Board. While there are many trustworthy and well intentioned accountants it is wrong to paint the profession in a holier than thou light.
I would say it’s absolutely true that Accountants have a competitive advantage. They can’t leverage it though because the ones that try are for the most part terrible at it and a danger to themselves and others.
Those that are good are so frustrated with the amount of paperwork required to provide advice (especially when compared to the verbal instructions they can provide for accounting advice) that they prefer to refer it out.
Sophie, I am hoping you have seen the research which clearly shows that less that 4% of financial advisers have caused these problems. It would be very interesting to turn the spotlight on some dodgy accountants and see what percentages this equates to regarding the same issues and probably even worse. Quite often I com across news reports about accountants who have be jailed for their actions but no one seems to stick the boot in to accountants as you have with advisers. We all need to work together for the clients benefit to restore confidence in the total financial system in Australia but with an ex-investment banker at the helm of ASIC I am not holding my breath.