Wealth advice
Matt Englund, managing director of Westpac-owned advisory dealer group Securitor, expects to see a “polarisation” of the accounting fraternity as it looks at the wealth advice business. “There will be people who want to make sure that their clients’ whole-of-life is looked after, and those people will embrace the wealth opportunity – whether that is self-licensed through their own business, joint-ventured or licensed through a dealer group. That group will prosper,” says Englund.
“There are other accounting practices, though, that mostly do compliance work, and they’re busy being busy. Those people will probably look at the wealth advice opportunity and say, ‘this is too hard’, and to be honest, they should think that.”
Most accounting firms will need to “weigh up the costs and benefits of moving into advice”, says David Hasib, director of financial planning at accountancy firm Chan & Naylor. “Retail advice is attractive because of the ageing of the population and the explosion in self-managed super fund numbers – many of those people running SMSFs need good advice.
“The choice is, if you want your broader-value proposition and service offering to include strategic consulting to SMSFs, and you want to charge for it, [then] develop the skills and the authorisation for that. Or you can stick to your knitting and focus on compliance work. It depends on what you want your accounting business to be.”
[breakoutbox][breakoutbox_title]SMSFs: new licensing arrangement[/breakoutbox_title][breakoutbox_content]As the Future of Financial Advice (FoFA) reforms take effect, the first order of business for accountants is the replacement of the accountants’ exemption in relation to advice to self-managed super funds.
Accountants are currently able to provide advice on the establishment of an SMSF but not on the investment products used by the fund. On 1 July 2016, this exemption will be removed, and accountants will need either a limited or full Australian Financial Services Licence (AFSL) to give advice on SMSFs.
Accountants will have to decide whether they want to be licensed in their own right (either a limited or full licence) or become an authorised representative of an AFSL holder.
With the limited licence, accountants will be able to advise broadly on superannuation products, general insurance products and basic deposit products – but not on particular products. For that, a full AFSL will be required.[/breakoutbox_content][/breakoutbox]
Working together
Inevitably, says Hasib, limited licensing will not work.
“It will allow accountants to talk strategically, but they can’t implement,” he says. “The problem is that more often than not, the client is going to ask for a recommendation. What do you do – not answer? So, either the accountant becomes fully authorised or teams up with a financial planner via a full licensing regime.”
Hasib expects the reforms to inevitably bring the two professions closer together, whether in a joint venture or in the same firm. “Accountants are losing the SMSF advice exemption, to talk strategically,” he says. “But don’t forget, the financial planners are losing their tax exemption [that is, from the taxation agent services regime]. We think it’s obvious that co-operation between accountants and financial planners will only become closer,” he says.
Gray believes there is a major risk associated with this advisory space. “The real worry is that accountants might suddenly believe that they can give advice they couldn’t previously, without recognising that they still need to be a representative of an AFSL – either have their own licence or be part of a dealer group,” he says.
And he believes the accounting bodies will have to manage this risk by creating a financial services licence that allows their members to become representatives under that licence.
In summary, implementation of advice remains the bugbear, says Gray. “Accountants have to focus on the requirements and not the opportunity. If they’re going to advise retail clients, limited licensing is not going to cut it. Again, it will come down to whether they really want to be in that market.”
