Speaking at a Sydney event, DBA Lawyers director Daniel Butler said some financial planners are now increasingly becoming registered to provide tax advice as ‘registered tax (financial) advisers’.
“That registration may not be a full-blown tax registration but they can talk about tax,” said Mr Butler.
“Some of them are now providing more compliance solutions in their financial planning practices – if you are referring clients to financial advisers you may want to check out the extent of their service.”
On the other hand, he said, accountants who provide traditional accounting services without an AFSL in areas such as business planning or the establishment of a company will need to provide evidence that proves the advice provided did not extend beyond the scope of these traditional services.
“That’s the regulation, and that’s why I’ve come to the conclusion generally that the planning community has won the turf warfare,” said Mr Butler.
“[Accountants] are on an island and have to justify their existence to give advice in traditional accounting services and again, this is where I’m saying the law hasn’t done you justice here if you are a mere accountant.”
Those accountants who plan to operate without an AFSL after 30 June 2016 are at risk if they stray off course. Therefore, they need to minimise their risk by ensuring all information about them that is available publicly indicates consistently that they have no licence nor do they provide financial planning advice, said Mr Butler.
He also recommended they provide appropriate disclaimers in written communications; clearly define scopes of engagements; file notes and confirmations of scope and disclaimers; and ensure there are no commissions or trail fees from financial planners.
While ASIC is unlikely to increase auditing in this area, Mr Butler said accountants face the risk of being sued by their clients if they provide advice that they are not authorised to provide.
“That’s what’s going to keep you honest – your clients or a competitor. If a competitor down the road finds out you’re giving this advice they’ll say, ‘hey ASIC, look at this guy’ and blow the whistle,” he said.
“The trouble is that as a professional you have to be not only clean but you have to look clean, so as a professional we generally have to be beyond reproach.”
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Most accountants I know are not interested in taking on financial planning and are happy to leave the selling of financial products to FPs. The irony of course is that more than a few accountants in public practice have a very in-depth knowledge of SMSFs. That means many are across the Taxation, Social Security, SIS, Trustee and Corporations laws as they relate to SMSFs. Post 1 July 2016 SMSF will be a financial product to which no exemption applies. As a result most accountants will get a limited AFSL, become an authorised rep or create some sort of cross referral arrangement with a FP. What many they will not do is learn anything new about SMSFs or change the way they give SMSF advice. The removal of the accountants exemption will likely create a lot of red-tape and on costs as accountants pay for services they will not use and do not need.
Having worked in both accounting and planning, a couple of aspects are compellingly interesting:1) there is a perception this is somehow a ‘war’ between FP & A/c. It is simply legislation based on client best interests, transparency and better regulating Australia’s largest cottage industry, so use a straw suck it up and decide which way you want to move on; 2) it appears most of the accounting comments are from older practitioners about how unfair it is. Back in 1997 the exact same words were coming from ‘experienced’ planners when they had to undergo changes in compliance and legislation around their industry. This is simply reality, whine all you like but move on with the changes or move out of the area, it is now simply a commercial decision.
Ethical, professional unbiased accountants and ethical, professional unbiased planners have an important role to play in bettering a client’s position.
Now the ISA on the other hand…
I laugh about the whole situation.
The only reason why I use an accountant at all is because I am required by law to get an audit every year. If I did not have to I wouldn’t. I can find out everything I need to know from various websites, especially now the ATO’s site is much friendlier.
I find it hard to have sympathy for a profession who owe most of their existance to a convoluted tax system and government protection. Having said that it is unlikely that I will ever visit a financial planner either.
This article seems to have stirred the hornets nest! As a FP of 10 years I have seen the good, the bad and the ugly with fellow FPs and accountants. Accountants are still very much seen as the key trusted adviser and rightly so in my opinion. I think there is room for collaboration here as the accountants I work hand in hand with do not want to be beholden to the onerous compliance regime that being licensed to provide Financial Advice provides. Particularly in the SME space there is a need for an “advice team” which can work extremely well where egos are surrendered, advice overlaps are clearly delineated and the client’s interests are always at the forefront of all advice provided.
George, the Greens and Labor had a duty of care because they didn’t understand the legislation that already regulated financial planning. That’s where the whole issue with FOFA and the mess that the previous government made with it stems from, a lack of understanding. The duty of care came from the provisions in the Corps Act, but the idiots from the Labor party wouldnt know that.
How stupid is it that as a fee for service FP I have to redisclose the fees that clients see coming from their accounts, but FP;s who are still 100% commissioned based don’t have any ongoing disclosure requirements under FOFA.
Storm was a fee4service model. It wasn’t commissions that buggered their clients, it was inappropriate levels of gearing.
Dear CM, you are 100% spot on. Accountants lost the war because the ICAA and CPA went about it in with the completely wrong proposal. Accountants did not give financial advice. The accountants exemption was purely to keep the status quo in having accountants assist clients to set of an SMSF and assist with making sure that trustees knew their responsibilities. Superannuation, as a whole, was then deemed to be a “financial product” so now almost anything to do with superannuation can be classified as a financial product hence the need to be licensed. if only the accounting bodies had the nerve and tenacity to keep pushing the real issue we wouldn’t be having this debate.
On the matter of sales & finance commissions on financial products I have only ever worked with financial planners only on the basis that they bill on a fee for service basis and rebated all commissions to the client. Imagine how many I approached and how few were willing to do this. FOFA is a step in the right direction but has been botched because of the political clout of financial planning groups.
Jimmy Neutron only tells the part of the story he wants. Most accountants who went into Timbercorp did it on the basis of financial planners pushing those products to them towards each year end. He also forgot to mention the Storm Financial and other failures that were solely in the domain of the financial advisers/planners etc. Collaborative work never succeeds when there are commission incentives involved. Eg who got the financing commissions? Not the accountants.
Lets stick to the facts.:-
This whole article goes against what the latest surveys are showing. Interesting tidbit in the September SMSFadviser magazine.
Survey conducted over 4000 SMSF trusees and 501 financial advisers showed that the proportion of SMSF trustees who were intending to approach financial planners for investment advice has dropped from the prior 70% down to 54%.
In summary, SMSF trustees appear to have become disillusioned with FP’s.
Sort of makes you think that the man in the street is learning not to believe the hype
” Jimmy Neutron” I would have some respect for your comments if you used your real name but hiding behind a cartoon character is totally pathetic. And yes, there are plenty of non registered people out there doing tax work and thankfully some (most?) of them are either in gaol or out of business. Financial planners have never shied away from giving tax advice and sadly they are the only industry where government had to legislate to enshrine a duty of care to their clients. That should really say something to the community .
Jimmy, you are totally wrong in respect of my clients. They all went into Timbercorp due to the advice by Financial Planners. Very few FP’s can hold their head high, something which most Accountants can due to the Professionalism and Ethical rules of the various Accounting Associations.
I think its hilarious that Mario Schmid brings up the example of Timbercorp when the vast majority of business written was done by people whose primary role was that of an accountant. Many of whom were licensed by Timbercorp et al to provide advice only on Timbercorp products. The accountant says, Mr Client you’ve got a tax problem, but don’t worry, I’ve got a solution for you. The biggest travesty is the idiots we’ve had in govt that forged the FOFA legislation didn’t understand the industry and tar all those who hold an AFSL with the same brush as those who sold forestry as a tax reduction strategy. Hello all you accountants out there.
Listen to all you accountants claiming to offer unbiased financial advice, for which most of you are licensed to do so. But claiming because of your ‘years of experience’ that you should be exempt from the laws of the land. Imagine the uproar if a non-tax agent started charging for tax returns.
Accountants have been utterly useless and have lost the turf war entirely. As an accountant, I have managed to stay away from financial planning because I don’t want to be considered leaching scum who try to justify commissions by selling rubbish investments that often can’t outperform simple blue chip indexes.
But the banks have won and we pathetic accountants will keep paying our membership subscriptions to our toothless governing bodies. Perhaps a bank will buy my firm one day. Only a matter of time I guess.
I don’t think it needs to be seen as a war. I am an accountant who is currently studying Financial Planning in order to become registered by 30 June next year so I can continue to work in the SMSF space. This has shown me that there are very different skill sets involved in what accountants and financial planners do, and I believe that they are complementary. Further, I believe that my recent learning has enhanced my capability in regards to offering SMSF services to my clients.
Accountants are all so great at it. Hence the changes. Speaks for itself really.
What does TD stand for? Why is it that others use their own name?
TD your practice must have been one of those stuck in Jurassic Park. I have been a partner in two practices over 15 years and each of those and their affiliates always took a complete holistic view of their clients’ affairs not just tax compliance. I feel for you with your self-confessed limited exposure to true accounting/business/personal financial affairs including tax among other matters. Tax is at the end of the line. No profit no tax.
What a laugh, this article has actually made me laugh out loud. I actually respected Daniel Butler before reading this garbage!!! Yeah I’ll do a 3 month course and become a financial planner scamming clients for commissions regardless if I do anything or not for them or regardless if they actually make any money from my advice or not and it’s accountants whom have to “justify their existence”?!?!?! HA!
TD I do not think 8 years is sufficient for you to claim what you say. As a practitioner of 35 years I think I might have just a little more experience than you. I have seen what you guys did leading up to the crashes of 1970, 1978, 1987, 1992 etc etc
Please be a little less sarcastic and a little more professional in your responses.
My dear TD, I will tell you how it’s going for me. It is going very well, thank you. I am not in gaol, I haven’t been fined, I haven’t had my licence cancelled, the ICAA has insisted on mandatory training for the last 40 years etc. etc. And financial salespeople? You have been a partner for 8 years and this makes you a spokesperson? Thanks for the laugh.
Yeh Cheers Rob, don’t make me laugh…Holistic. Who are you trying to kid. I work with 22 Accountants and its only been a more recent revelation to them that there is more to SMSF than a historical report and a clean audit. While you must might be the exception and exceptional, myself having been part of 6 partner Accounting firm as partner for 8 years I have seen this first hand and our firm is not on its own. Thank the lord it is changing.
TD – clearly you know nothing about Accountsnts and the holistic services they offer their clients.How many clients have you been looking after for 39 years.Iam younger than George – some of my clients only go back to 1981 and since that time they have been looked after by a QUALIFIED PROFESSIONAL who is a member of a recognised Professional body -now don’t tell me you think the FPA has that sort of status.Amazing that George and I have survived without taking a commission in our lives -simply invoiced clients for what we believe is fair reward for our extensive knowledge and expertise and qualifications.
What an extraordinary opinion.
Thanks George….Kinder. But hey the world has moved on from 1976 or hadn’t you noticed..and Accountants in the main have continued with the historical production of a tax returns as their value proposition. Hows that going for you?
TD, your comment is total rubbish. I helped a client set up their SMSF in 1976. They totally knew the relevance and simply wanted to get away from the clutches of the life insurance companies. Financial planners hadn’t even been invented then!! Where were you in 1976?
Clients have a good level of loyalty so I don’t see there being an exodus to planners. Tax isn’t everything and planners know bugger all about business valuations, strategic advice etc. On the other hand accountants well and truly lost the fight over retaining the exemption when the ICAA (as it then was) and the CPA totally capitulated over the issue. They waged the wrong fight and we are now paying for it. Then goodness retirement is looming!
Accountants have never been much good at it anyway and missed the reasons for the existence of SMSF for most part. So no surprise.
I have been saying this since 2007 when all this “finanacial planning” advice and registration was being muted.
Unfortunately our professional bodies were tardy in their approach and insufficiently aggressive enough in pushing their members interests. Now the accountant cannot even suggest to clients whether they should take a conservative or aggressive approach to their financial assets. Where does this leave SMSF’s with members approaching retirement? How good are financial planners anyway? Remember Storm Financial and Timbercorp amongst others? Our professional bodies with their vast resources effectively sat on their hands until it was too late. Now an accountant has to spend upwards of $20K to become licensed and then further CPD expenditure together with their professional accounting body fees and CPD requirements. This will effectively alienate accountants with a turnover of less than $500,000 as they cannot justify the economic cost against the returns.
Daniel Butler is correct insofar as the Financial Advisory industry lobbyists have been more influential in railroading the Government into watering down requirements that would have given consumers more protection.The Banks are at the top of the pile in this Financial Advice Industry and there is enough evidence around as to how poorly they have managed their people and how often they have let down their clients.I am happy that I am a member of the Accounting PROFESSION who is also licensed to provide financial advice as I know my clients continue to get the best possible advice and services available.
Its ok, accountants will still be able to give factual information. Apparently its a service to humanity