Above the fray
In an increasingly fractious financial services sector, is SMSF specialisation a force for good?
After four hours of rhetorical to-and-fro, the senator had had enough.
With slung mud caked thickly to the walls of the sweaty meeting room at Sydney’s Four Points Sheraton, a tension hung in the air over the parliamentary joint committee (PJC) hearing on proposed amendments to the Tax Agent Services Act (TASA).
His patience wearing thin, shadow minister for financial services Mathias Cormann slammed the assembled industry lobbyists for playing the man and not the ball.
“What disturbs me is that there seems to be a turf war between the accountants on one side and the financial planners on the other,” Senator Cormann proclaimed in his signature, no nonsense Flemish accent, directing his remarks at Robert Jeremenko of the Tax Institute of Australia who was giving evidence at the time.
The senator’s outburst did not come unprovoked. For weeks before the scheduled hearing, the financial services industry bodies had been ramping up the spin. With the government threatening to introduce a new regime under which many financial planners will be required to register with the Tax Practitioners Board to provide general tax advice, the discord had reached new levels.
Having sent lobbying delegations to Canberra, where the Tax Laws Amendment (Measures No.2) Bill 2013 was moving confusingly from one corner of Parliament House to another – to carve out an extension, if not an exemption, for affected members – the Financial Planning Association (FPA) and Financial Services Council (FSC) came under fire from their counterparts in the accounting industry bodies.
Yasser El-Ansary, general manager, leadership and quality, at the Institute of Chartered Accountants, issued a statement claiming the lobbying efforts of the FPA and FSC on TASA were jeopardising “much-needed consumer protection” and were tantamount to cowardice.
“Financial planners must not walk away from these vitally important reforms now, at this eleventh hour,” Mr El-Ansary said, while CPA Australia’s Paul Drum opined the “missed opportunity” when the Bill was referred to the PJC.
In response, the FPA’s Dante De Gori castigated “scaremongering” from the accounting bodies, describing the tactics as “misleading and unhelpful” and setting the scene for the subsequent showdown when the PJC did call in the relevant stakeholders for an official hearing.
Just as the dust was settling on the TASA negotiations – put to bed by the federal parliament’s passage of the Bill on 28 June, along with a 12-month extension for financial planners – a lesser known accounting body pulled on the gloves.
In a seemingly routine statement announcing a new staff member to the press on Monday 22 July, the National Tax and Accountants’ Association (NTAA) – an industry body claiming to represent 8,500 accounting and tax agent firms – launched an angry critique of the financial planning segment of the market.
Warning consumers against seeking advice from a “stranger” financial planner – and insisting that instead they should see more trustworthy accountants – the statement cast aspersions on the entire sector.
“How can an industry be so bereft of integrity that the government has had to legislate that they act in their clients’ best interests?” the statement asked, in a clear nod to the Best Interests Duty requirement of the Future of Financial Advice reforms.
While many took the NTAA’s comments with a grain of salt – Tim Mackay of boutique firm Quantum Financial pointed out that a “professional organisation such as the [Financial Planning Association] or [SMSF Professionals’ Association of Australia] just wouldn’t do this” – other members of the financial planning fraternity were not so easily placated, with many angry comments flooding the financial advice online forums.
Once again, it was the shadow minister for financial services who called for calm, castigating the NTAA’s comments as “reckless and irresponsible” and pointing to the good work done by many financial planners on the client front.
Ultimately, the NTAA’s underlying motives were exposed – the body runs a for-profit Australian Financial Services Licence (AFSL) which it is currently spruiking – but the event’s significance lies more with the response than with the perpetrator.
The lobbying around TASA and the aftermath of the NTAA publicity grab exposed deep divisions and vitriol within some segments of the financial services sector.
GIVE PEACE A CHANCE
And yet, beneath the headlines, there are accountants and financial planners (as well as almost every permutation of financial service providers, from mortgage brokers to actuaries) working together under one roof in businesses across the country.
Earlier this year, Omniwealth managing director Matthew Kidd, who runs one such practice, told SMSF Adviser about the benefits of the ‘one-stop shop’ model. “Mortgage brokers are becoming insurance brokers; accountants are becoming financial planners,” Mr Kidd said. “The adviser is front and centre when it comes to dealing with clients, but they have this whole machine behind them and that means the clients don’t have to go anywhere.”
Institute of Public Accountants (IPA) chief executive Andrew Conway lists this diversification of services offered as one of the highest priority issues of the accountants his organisation represents.
“Where, in the past, practices were often small accounting firms with a couple of partners, now many have evolved and are capturing all the compliance services and wealth management in-house,” Mr Conway tells SMSF Adviser, adding that this trend is driven by consumers wanting a “single portal” rather than by the associations.
“This open hostility is just not something we are hearing from our members; instead, they are looking for business opportunities,” he says.
Fed up with the argy-bargy between some segments of the market, BT Financial Group’s Annick Donat – who provides practice development services both to accountants and financial planners through the Securitor and Licensee Select businesses – says there is a business imperative for working together.
“Industry experts and associations are supportive of the convergence [of accounting and financial planning] and many dealer groups are using this as the basis for future strategic objectives,” Ms Donat says. “However, when you scratch the surface of these conversations, we find a great deal of uncertainty – that seemingly never-ending debate on which camp is truly professional and who holds the client relationship. We’re a long way from playing nicely in the sandpit.
“If – or hopefully, when – we decide that the accounting and financial advice industry are a natural growth strategy, the opportunities we create for ourselves, our clients and, importantly, [for] our reputation will be significant. United we stand, divided we fall.”
However, this business opportunity presented by the trend towards multi-service firms did not sprout up in the middle of nowhere. Rather, it is intrinsically linked to the rise of self-managed superannuation.
Underpinning Mr Kidd’s business strategy, for example, is a fervent SMSF specialisation. “A majority of our workload is SMSF-[related],” he says. Similarly, Mr Conway says that his members’ interest in diversification as well as the licensing options available to them has largely been driven by SMSFs.
For SPAA chief executive Andrea Slattery – sometimes referred to as the ‘fairy godmother’ of SMSFs – the links between SMSF work and a collaborative, rather than antagonistic, approach to financial service provision are fundamental.
Ever the diplomat, Ms Slattery declined to comment on the mudslinging by some of the other associations within the industry, replying simply that the SMSF sector is “above the fray” – not because SMSF specialists don’t like to get dirty, but because collaboration is at the very heart of SMSF specialisation.
“When you are talking about the very complex tax and superannuation advice involved with SMSFs, clients are used to having a suite of people that add value and provide services to them,” Ms Slattery says. “SMSFs are all about an individual trustee making decisions off the back of a range of advice from a range of professionals.”
Seasoned SMSF specialist Mr Mackay says SPAA itself has played a role in fostering the collaborative mentality. “I’m both a chartered accountant and a certified financial planner, so I can see the argument from both sides,” Mr Mackay says, reflecting on the exchanges between industry associations.
“But at SPAA events you have accountants and planners working together to solve the same problems – the membership doesn’t see a divide because while there might be different backgrounds or specialisations, we are all SMSF advisers at the end of the day.”
This mindset reflects the idea that SMSF specialisation is a profession, as championed by SPAA. Core to the idea of a profession – as opposed to an industry – is education, Ms Slattery says, and education breeds respect.
“There is a genuine respect [among SMSF specialists] for the other professions that add value to clients, and also genuine respect across the board for the various professionals who have committed to the sector,” she says.
“Education is absolutely key in this, which is why we have raised competency standards and challenged the market to meet those standards.”
While the growth of the SMSF market has undoubtedly contributed to the convergence of the sectors and a trend towards diversified financial services providers, there are also signs that competition for SMSF trustee business may in part be fuelling the association ‘turf wars’.
Following its public statement attacking the financial planning industry, the NTAA sent a communication to members that revealed some of the paranoid thinking behind the move.
In the July email to members (obtained by SMSF Adviser), the NTAA’s leadership warned about the “financial planning empire” muscling in on the business of small accounting practices, singling out AMP’s push into SMSFs.
The email stated: “AMP… is running full page newspaper ads titled ‘Need help with your SMSF compliance?’. It then has the audacity to state that it is ‘Australia’s experts in self-managed super’. Big call! The ad also says that AMP can ‘help with the day-to-day paperwork, from organising tax returns and arranging the annual audit to creating the official minutes of trustee decisions’. Turf War? No – a full on offensive, a blitzkrieg, launched against accounting practices to entice clients away from their most trusted adviser and into the arms of a huge financial empire.”
The IPA’s Mr Conway, who is a passionate supporter of smaller accounting firms, says the NTAA’s claims are not reflective of the true dynamics of the SMSF market. “For people to assume this is some clandestine big business attack on small practices is misguided,” he says.
For Ms Slattery, the problem with the NTAA’s view of the market starts with the ‘us or them’ premise adopted.
To succeed in the SMSF space, you need to understand that you won’t have a trustee all to yourself – something that often smaller accountants and financial planners seeking to gain a toe-hold in the market can miss.
“As an SMSF trustee, you can do what you need to when you need to do it – by which I mean that a professional’s advice services may be required regularly or irregularly depending on the nature of the work,” Ms Slattery says, pointing out that this is quite different from practice in other advice spheres.
“The whole concept of providing a valued service means it could be regular or irregular; you can’t have ownership of all of a trustee’s needs – you may be the preferred and trusted adviser in a particular area of expertise but the client will need other professionals as well – in some cases, compulsorily.”
Mr Mackay, who is on the record speaking about the problem of consolidation of the market by the larger players, thinks the fears implicit in the NTAA’s email are unwarranted. “There’s plenty of work to go around,” he says, “but only for members of recognised professional bodies that are focused on professional standards, not self interest.”
So while everyone is keen to get a piece of the SMSF pie, it’s clear the experts think there is no place in the SMSF industry for the mudslinging and negative rhetoric plaguing other sectors.
Those who fail to get on board with the harmonious approach may just have one very frustrated senator to contend with.