An often-overlooked licensing solution

The most appropriate option for many accountants, however, could be right in front of them: referrals to a licensed financial planner.

SMSF establishment advice

Before looking more deeply into referral arrangements, accountants need to firstly step back and determine their options. The only change with the removal of the accountant’s exemption is the ability for an accountant to provide advice on the establishment of an SMSF. There will be no restriction on accounting services or taxation advice, nor has the exemption ever allowed accountants to provide wide-ranging personal financial advice on superannuation products.

Accountants need to look at how many clients they advise to establish a new SMSF every year compared to the initial and ongoing costs of licensing. The more frequently this type of advice is given, the more worthwhile it becomes to look at licensing options. I acknowledge that accountants also need to look at the overall strategic direction of their business and not look at SMSF establishment advice in insolation.

Research by Aaron Dunn of The SMSF Academy showed 56 per cent of respondents to the 2014 Future of SMSF Survey set up less than 10 SMSFs in the previous 12 months. It is acknowledged that participants in this survey are more active in the SMSF area compared to the average accountant.

Combine the above result with the fact that 64 per cent of tax agents lodge 20 or less SMSF returns each year (ATO Statistical Overview 2013-14) and we can extrapolate that the majority of generalist accounting businesses simply don’t establish enough new SMSFs to justify any licensing option. Even sizeable accounting businesses with a stable client base including hundreds of SMSFs may only provide establishment advice to a handful of clients each year.

If accountants are not going to become licensed and no longer recommend the establishment of new SMSFs, a referral partnership will enable positive client outcomes without the compliance burden. A referral solution in essence is simple, but to make them work successfully, a few things need to happen.

Acknowledge value of advice

Accountants need to understand and believe in the value financial planning can provide their clients. Reading comments made by accountants in the industry media (as I often do with an ample supply of popcorn) you quickly see a small vocal majority threatened by financial planners. They perceive them as dodgy product floggers who will do anything for a quick dollar.

My message to this minority as a fellow accountant is simple: Get over it! There is something more important here than your bruised professional ego: your clients.

Financial planners conversely need to better communicate and demonstrate their value to the accountants they collaborate with. One great way to do this is to prepare a financial plan for the accountants themselves either pro bono or discounted. This will ensure the accountant becomes a genuine advocate for financial planning advice, and will give them more confidence when they refer their clients. Planners also need understand that it takes time, patience and nurturing to get accountants referring. This coaching time should be seen as an investment rather than a burden.

Similarly, stepping accountants through real-life case studies of the results they’ve achieved is another easy way to demonstrate the value of advice. Planners should regularly coach their referral partners on how to refer. This can be done by giving regular feedback on both successful and unsuccessful introductions to help identify future opportunities and situations where a referral is either appropriate or not appropriate. When a referral is made to a financial planner, the accountant needs to step back and let the advice process happen.

Referring is not a sign of incompetence. Surveys have been done and the results are in. When you refer a client to another professional with a different set of skills, your clients don’t think you’re incompetent. They don’t view you negatively or think any less of you – the opposite is true. They see you understanding their needs and that you genuinely care for them. Referring your client to an adviser will strengthen your relationship – not diminish it.

Collaborate and conquer

All professionals need to understand their own area of expertise. Too often, complimentary professionals see themselves as competitors, rather than potential collaborators. Accountants – or any relationship professional – should only attempt to deliver services where they can do so in a powerful way.

John Birt from Radar Results recently said that accountants can’t do planning part-time. He is right – financial planning is a profession in its own right. It’s not simply an add-on to accounting services.

There is a belief in the SMSF space that we are approaching a convergence between accounting and financial planning. I don’t see this – at least not at an individual level. As a professional you can’t be all things to all people. Any convergence is happening at a business level: Accountants insourcing financial planning, or advisers purchasing accounting practices or any variety of partnerships or joint ventures.

Financial planning is hard. Understanding people and doing a deep dive into the things that keep them awake at night is a skill great financial planners have mastered. Accountants may be ‘across’ the breadth of a client’s financial, tax and business affairs, but planners have the ability to address emotional aspects of their financial lives.

Practice makes perfect

Making the decision to utilise a referral solution rather than a licensing option is just the first step. Like everything in business, time and effort needs to be invested to ensure the relationship is fruitful and that all parties – accountant, planner and client – win. It’s not a matter of simply shaking hands and waiting for the new clients to be walked through your door.

Specifically, the following three high-level items should be addressed prior to entering into a referral partnership as well as being regularly reviewed:

1. Cultural alignment: This is not about a strategic fit. The reason why you and a potential partner are both in business should be the key reason for collaborating. Start with why.

2. Referral agreement: Get it in writing. Cover items such as revenue/profit sharing, restraint provisions, communication expectations, agreed service levels, KPIs and how to unwind the agreement.

3. Measure performance: Develop a method to track, report and monitor the value of the referral relationship. Where performance doesn’t meet targets or expectations, work collaboratively to address and improve.

An accountant and financial planner working together with the client’s best interests at heart are more than a team. They’re powerful force that can change lives.

Kris Kitto, director, Superfund Partners