This week CPA Australia released a report called ‘The impact of complex regulatory reform’ which criticised the regulatory framework around financial advice as “convoluted” and “excessively layered”. On release of the report, financial advisers around the country muttered ‘welcome to our world’ and wondered whether the CPA criticism would help lead to ‘better’ regulation across the whole industry – or just to carve outs for accountants.
The financial planning policy adviser for CPA Australia, Keddie Waller, said the report would provide CPA Australia with a basis to start lobbying to simplify the regulatory framework. From a holistic point of view – this criticism may benefit advisers currently struggling under the regulatory burden, but if the lobbying took the form of simple carve outs to benefit accountants only, it would be an opportunity lost for the advice industry. A carve out option is feared because among several recommendations to tackle the problem of “over-regulation” the report recommended redefining product advice so that an accountant can provide general strategic planning advice.
The report highlighted that that 34.6 per cent of accountants who offer financial planning advice are considering cutting down on the number of services they offer, while 12.5 per cent are considering ceasing operation altogether due to the regulatory burdens imposed on the industry. Accountants can currently provide SMSF-related (and ‘class of product’) advice under a limited license provision, which is cheaper than a full licence. However, Waller said it “hasn’t been the success it could have been” because the time and cost to provide the advice is still too prohibitive. To give more comprehensive advice, Waller said accountants can potentially require up to four more licences with a potential cost of over $110,000 per year.
In a statement that would no doubt resonate with many advisers, Waller said “Accountants feel like they can’t actually charge what it costs for them to give advice…. It ends up becoming a loss leader for them.” Considering that accountants have other revenue streams to potentially fall back on, this statement should bring the costs associated for dedicated financial advisers into sharp relief.
Industry estimates a loss of up to 30 or 40%% of financial advisers industry wide – mainly due to pressures (time and cost) associated with the new qualification and regulatory regimes – along with existing and potential changes to adviser remuneration.
The report notes this loss and says the accounting profession “has an opportunity to supply new financial planning advice capacity” to a growing unmet advice need. This opportunity, however, is being hampered because “professional accountants find themselves restricted by the current regulatory framework from providing such services”.
While speaking specifically on behalf of accountants, many of the regulatory and compliance issues outlined in the report are nothing new to financial advisers. Given the CPA speak for a membership of over 160,000, it may have considerably more lobbying muscle than that of its financial advice brethren. Many in the advice industry would consider it a shame if the proposed recommendations of the CPA were listened to and belatedly (as far as advisers are concerned) acted upon in a manner that was too late to help advisers currently struggling with many of the same problems.
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Comments12
"MD - as accountants we do look to the future and offer strategy. Beleive it or not accountants prepare cash flows, budgets tax planning, break even calcs, NPV for businsses and individuals. Accountants want to provide this advise but do not want to provide advise re insurance recommendations or investment recomendations. We do the same thing as Fin Planners for individuals - double up the licencing requirements are wast of time for accountants. "
John Stankevicius 17:40 on 02 Oct 19
"I agree with the above comments but having said that, where is a coordinated approach from our financial planning associations to simplify what has become one of the most convoluted compliance regimes ever devised by man......"
MD 16:51 on 02 Oct 19
"John Stankevicius, your comments, if indeed shared by the greater accounting community, are exactly the reason why accountants should not be given a free ticket into financial advice. And certainly not void of your profession carrying out the same ongoing CPD/ education/ upskilling that we advisers must. You are honing in on the word 'financial' in 'financial adviser'... we are not merely numbers focused, sure we can work numbers, but we deal with STRATEGY. Strategy that solves a myriad of a clients current and future problems, ones they can't even see yet. Put another way, we foresee into the future and are not only reporting on what happened last year alone. Cashflow, Wealth/ Investment, Super/ Allocated Pension (have a look at the rules on those when you get a spare moment), Personal Insurance, Estate Planning, Debt Restructuring, Retirement Planning, Aged Care... how many of those do you think you CONFIDENTLY could advise on John? Thanks for coming by the way."
Bemused 16:15 on 02 Oct 19
"Agreed Wade - Accountants just want to get a larger piece of the FA pie with all the advisers leaving orphaned clients."
Ben 15:34 on 02 Oct 19
"There will be no carve out so they may as well stop resourcing the pursuit of this. They should change tack and join the crusade to reduce the over regulation for all industry participants. It simply can't be one specific advice rule for one sector and not others. "
GT 15:33 on 02 Oct 19
"I highly disagree that learning aspects of corporate behaviour, investor psychology and emotions is a waste of time. The behavioural economics aspect is one of the most valuable aspects that a true financial planner gives their clients. There are a large amount of aspects and areas that accountants don't understand about financial planning. Accountants have their own work cut out for them and I don't want to, and cannot also be my clients accountant. The reverse should be the same. Accountants should continue to be separated from financial advice and concentrate on their area of expertise and let financial planners deliver using their relevant expertise. "
Wade S 15:28 on 02 Oct 19
"A rational answer. What we did in the past is being pulled into line, whilst being beneficial to clients does not make it legal now. We all have to tow the line- complete the educational requirement and continue or scale back to that we are licenced/educated/authorised to do. We may not like it but it is no different to doing 60 where it is now 50 and getting caught. Bite the bullet and get on with it or stick with what you are educated to do. It is a great pain to all, even if only one subject plus FASEA. I sit in both camps-CPA and CFP."
Dave from the bush 15:23 on 02 Oct 19
"There are so, so, so many things that frustrate me about this push from the accounting bodies. And not just because they'll get their way. Firstly, if you want to give financial advice then qualify as financial advisers, be licensed as financial advisers and operate as financial advisers. Same as if you wanted to become a doctor/carpenter/architect, then qualify as a doctor/carpenter/architect, be licensed as a doctor/carpenter/architect and operate as a doctor/carpenter/architect. As much as they seem to think advice and accounting are the same (presumably because they both have numbers, I guess?) the simple fact is that they are not. They are distinct, specialised, difficult occupations. Secondly, that accountants feel financial advice is 'so easy' they can do it without proper training or licensing just highlights their lack of awareness of what's actually involved in providing clear, concise, professional financial advice. I don't purport to be able to do their job because I did a few accounting units at uni - to have them constantly saying they could do my job despite not being qualified is an insult. An insult that perhaps, just once, somebody in this industry could push back on with some real force. Thirdly - can someone please explain how you can recommend the establishment, maintenance or closure of an SMSF without triggering the Corps Act provisions around product advice? Where do the funds come from? Where are they then invested? What about the insurance requirements? Either accountants are not giving advice about these issues and leaving clients to fend for themselves (see the mass mailing from the ATO about investment strategies on how successful that's been) or they're giving unlicensed product advice. Neither is really a great outcome, is it? Finally - well not really, but I can't be here all day - I'd direct your attention to the CA/CPA submission to the Treasury review of the TPB, in which they argue they should get the financial advice exemption reinstated - but going apoplectic at the idea of lawyers retaining their exemption when it comes to taxation advice. The hypocrisy hangs heavy in the air. "
Frustrated 15:22 on 02 Oct 19
"Maybe I should become an accountant and provide financial advice, its seems easier....."
Chris 15:17 on 02 Oct 19
"Being an accountant in practice completing RG 146 was a complete waste of breath. Learned absolutely nothing. Now I have do an additional 40 hrs for financial planning wasting my time on corporate behaviour, investor psychology, emotions etc .Meanwhile I am struggling to keep up with the software revolution taking place, changes to directors responsibilities, tax changes, management methods , finance applications and accounting standards. I not been able to train my team as effectively as I used to before I had to do this 40 hours of garbage. Further FASEA exam - garbage - common sense wrapped up with specific sections of the corps act - now I have to parrot this nonsense up. The whole FASEA thrust has accountants and fin planners are convicted guilty criminals - the union funds , govt employees should be viewed this way. Accounting is hard stuff and the prof development more than covers the fin planning prof development. It is far more skilled and difficult. Go CPA and CAANZ in carving us out of this nonsense. We have been taught how about maths and arithmatic and are able to value a decision as well as businesses aka - public companies. FASEA get lost."
John Stankevicius 14:55 on 02 Oct 19
"...the accounting profession “has an opportunity to supply new financial planning advice capacity” to a growing unmet advice need. WOW - dedicated advisers aren't even cold in the ground yet. What an "opportunity""
disgusted 14:51 on 02 Oct 19
"Accountants have been giving "financial advice" for years without the regulatory scrutiny that we face. Now they want a carve out so they can continue doing what they've always done with a clear conscience. "
Simon P 14:42 on 02 Oct 19