The 2017 Vanguard and Investment Trends SMSF Report found that a record high 277,000 SMSFs reported having unmet advice needs across three clusters of tax and super, retirement strategies, and investment advice. This is from a total pool of 585,000 SMSFs
Investment Trends research director Recep III Peker said that with the super reforms in place, trustees were looking for an adviser that could comprehensively address their various needs.
“Whenever the government plays with the super it creates an appetite for financial advice because people want to understand how it affects them and what can they do as a result,” said Mr Peker.
“Trustees are after someone who is able to help them across all their needs, they want an adviser who is an expert in handling SMSFs, someone they can trust, and who is able to address all of their needs.”
While trustees equally saw accountants and financial planners as trusted sources for their unmet advice needs, there was a gap in the service proposition of accountants that have seen trustees shy away from using one, Investment Trends found.
Out of the total pool of SMSFs, close to half chose not to use an accountant directly, while 214,000 only used an accountant for tax advice.
Interestingly, 60 per cent of those SMSFs using an accountant for tax purposes said they would use them for investment advice if they offered it.
Mr Peker said this reflected the gap caused by the introduction of AFSL requirements.
“If [an accountant’s] proposition is just around establishment and admin, someone else can do it cheaper so the opportunity is to expand your proposition,” he added.
“If my accountant started providing investment advice, [like the] 60 per cent said, [I] would get investment advice from them because I’ve known them for a long time and I trust them and I know they’ll look after me.”
However, the report highlighted how most accountants were not planning to obtain a license, with a growing proportion turning to build a relationship with a financial planning firm instead.
Up to 56 per cent of accountants said they employed someone in-house who could provide financial planning advice, and 19 per cent referred clients to financial planning firms, and 11 per cent received two-way referrals with financial planning firms.
Vanguard market strategy and communications principal Robin Bowerman, said the rise in this multidisciplinary practice was down to risk management by accounting firms.
“You hear a lot of accountants saying well we looked at it from a business point of view, we even talked to certain dealer groups and what they realised was, it’s not easy to add the skills or a good financial planning business to an accounting practice and they actually realised that they don’t know a lot about investing per se,” said Mr Bowerman.
“At that point it becomes a risk because if you think about an accounting practice they’ve got a lot of small businesses and they are doing the audit, the tax work for individuals, and the last thing they want to do is move into a financial planning business which could damage their relationship with the companies that they are servicing as their main clients.”
Dear Jimmy, accountants charge for doing compliance work. Someone has to prepare financials to be audited. Accountants “look after” legislative and regulatory requirements. There is no fee for “funds under management” because they don’t manage any funds.
There is no evidence that they are “moving away from accountants”. Just that there is an un-met need and a lot of SMSF’s do not approach either their accountant or a financial planner. The fact that so many will not approach a financial planner probably indicates that the industry has some serious issues that need to be addressed.
SMSF clients might well say they would “trust their long-time accountant to give them investment advice”, but that is simply another example of a false perception or the “expectation gap”. While the general public may perceive that their accountant & stock broker & financial planner for that matter, must be rich and hold all the keys to becoming wealthy, we all know that this is far from the truth. If such advisers had the all the answers to investment performance, they would be sitting on a beach somewhere and not telling anyone how they did it!
Al least most accountants are professional enough to recognise their limitations and stick to providing taxation and structuring advice, not pretend they are “investment experts”. With the current regulatory burden this country struggles under, no credible accountant has the resources to extend themselves into another complex discipline like investments, and most won’t pretend to just because they get a dime-a-dozen financial planning license.
This unlike financial planners, who profess they are masters of all disciplines including investing, when in reality they have no expertise and just play the bluff by singing from the dealer group hymn sheet about barrels of oil or emerging markets to convince the client to sign up for an expensive and wasteful “looking after” fee which gives a client false peace of mind about their investments, but very little else.
George, nothing like accountamts who charge their annual looking after fees