The accounting profession has been heeding warnings for several years now that traditional sources of revenue, including compliance-based services, will not provide a steady or substantial revenue stream in the long term.
The phase-out of the accountants’ exemption, which forces accountants to consider becoming licensed under an AFSL to provide SMSF advice, has been touted as an opportunity for accountants to add value to their clients through the provision of additional advice-based services.
However, Vivienne Quinn, of recruitment and practice broking specialists Quinn & Associates, has identified a distinct lack of demand for accounting practices that contain a wealth management arm as part of their revenue base.
“We’re finding that there’s not a great demand in the market from purchasers to buy wealth management fees,” Ms Quinn told SMSF Adviser’s sister publication AccountantsDaily.
“I believe it’s because purchasers are nervous about the changes that are happening around wealth management legislation and rules. I’m hoping it’s just a passing trend.”
According to Ms Quinn, even practices that are located within “very saleable” cities are proving unpalatable to potential buyers if they contain any presence of wealth management.
Ms Quinn gave the example of a reputable Sydney firm with a revenue base consisting of $700,000 in accounting fees and $200,000 in financial planning, which has been on the market since June 2015.
“It’s the financial planning side that’s held it back,” said Ms Quinn.
“If it had been a straight accounting firm, we would have had it under contract within six weeks – no problems at all.”
Despite flagging a concerning trend, Ms Quinn was quick to point out that there was no succession planning issue within the accounting industry, as the demand for practices remains as high as ever.
“In all the years that we’ve been selling practices, there has always been a shortage of vendors and an oversupply of purchasers; the only time a one or two-partner firm would have difficulty selling or would take a lengthy time to sell is if it is located in a small regional town.”
She added: “There is high demand across every capital city in Australia, and high demand across every sizeable regional city.”
“It’s definitely a seller’s market,” Ms Quinn concluded.
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Financial planning is much more than purely investment advice, the same as accounting can be more than simply scorekeeping. But as accountants will find as they move into financial planning, the level of compliance in providing advice is significantly higher than many are used to. That all comes at a cost. If people don’t value advice and don’t want to pay for it, that’s fine. Some people will succeed financially without it, but when the vast majority of people struggle to generate any real wealth outside what they get from buying a home and having it grow, something is amiss. Plenty of studies show that those people who get advice are wealthier, better protected and happier than those who don’t. Now thats a ‘Compare the Pair’ story worth telling.
@ DavidL, I agree. Not everyone should get financial advice. Absolutely their choice (then again it should be mandatory when implementing an LRBA IMO).
I was merely replying to George’s comment trying to discredit the service an adviser can provide.
I’d say the clients that have been sitting in cash since 2008 on the advice of their accountant would have preferred to have some financial advice.
[quote name=”Reality”]George, have you ever reviewed the performance difference of advised SMSFs vs non-advised?
There is a seriously huge difference with unadvised SMSF investments performing horribly much of the time.[/quote]
That may very well be true, Reality, but no amount of legislation will change that. You can’t make it mandatory for people to seek advice before making an investment decision; and even if you do, you can’t then force them to take that advice.
People make investment decisions for a whole host of reasons, some well thought out and some not, and some which just seemed a good idea at the time.
Some take advice, and many don’t, but when you boil it down they will do whatever they think is right for them…and, at the end of the day, it’s their money and, therefore, their choice.
Oh George please! Preying on insecurities. That would be the daily bread of any grass roots accountant wouldn’t it? I’ll do what you can do but I’ll save you from the ATO hey! FPs concentrate on issues client do and importantly should worry about. Clients pay what they are happy to pay in the manner they pay and envy over the fact that they value this more than compliance tax work is your problem. Accountants are worried about an inability to display value after all the form filling and calculator ends or is outsourced to the lowest cost provider. Preying on client insecurities via legislative gifts from the ATO will end or substantially lessen. SMSFs, the form filling and compliance tax work is now being done at such a low cost/ value item that accountants are rightfully worried they have no stake in substance(advice and guidance)unless they get licensed and skilled in the provision of valued advice, the substance.
“That’s why SMSFs typically don’t use an FP and want to be self directed.”
George, have you ever reviewed the performance difference of advised SMSFs vs non-advised?
There is a seriously huge difference with unadvised SMSF investments performing horribly much of the time. A client saving on fees is all well and good but not when the investment returns are negative because they have no idea what they are doing or its simply sitting in cash.
I understand how FPs charge only too well Jimmy, I just don’t think clients should pay wasteful retainers. You tout “fee for service” but its just an annual “looking after fee” paid regularly and no doubt equivalent to what you would have made had you taken commissions & trails etc. You FP’s prey on investors insecurities. They may find some solace that you say you &/or your dealer group/platform are looking after their investments 24/7 while they go about their lives. The fact is that you sleep when they sleep and are no more “on the job” with their investments than they are & are no doubt as reactionary as any other service provider. Touching base & parroting your latest dealer group hymn sheet or bamboozling with them with talk of “barrels of oil” only works on the naive. A true “fee for service” is where a professional renders service for the work that they actually perform.
That’s why SMSFs typically don’t use an FP and want to be self directed.
GeorgeVC, the cynic would say that charging by the hour simply encourages you to go slow. I knew an accountant who must have never slept, which could be the only reason that he managed to charge more than 24 hrs in a day…
There is no perfect system – time billing, percentage based fees, commissions, task based, value added, outcomes based – they all have their flaws. They are all relevant in specific circumstances but not in all. I know plenty of accountants who put clients on a fee schedule and have it paid monthly. Good for both the clients cash flow and the accountants.
One wonders George, if accountants are so opposed to asset based fees and comms, why there are so many of them already wearing two hats and providing financial planning advice (even well b4 the accts exemption ending). Most appreciated the opportunity to get away from billable hours and timesheets.
Maybe you just don’t understand financial planning George
I must concur with Ms Quinn. If you are an accountant looking to buy fees, an in-house financial planner is the biggest threat to the goodwill you are about to pay good money for. Financial planners are generally paid by montly retainers “looking-after” fees &/ or commission from clients investments/insurance. Whatever they want to call it, they are not on the clock like accountants are. This gives them time to smarm their way into client’s affections. As salesman after all, they are good at manipulating clients so they think they are the only one who truly “cares” and “makes a difference” to their future. Since FP’s typically dont understand accounting, business structuring or taxation, they dont value our accounting services, one of the reasons they commonly think cheaper is better and try to outsource the accounting so as to further control the client relationship. Buyer beware!