Advice / APAC / Global / Insights

Accountants and financial advice: avoid or fill a void?

As more financial advisers head for the exit doors, prompted by higher education standards and an end to grandfathered conflicted remuneration, accountants are a popular choice to step into the void to meet an escalating demand for advice. But what do accountants who plan to enter the industry expect their advice offering to look like – and will they tread the same path as their colleagues before them? 

The five-year countdown has started on the roll-out of new education, professional and ethical standards for financial advisers. As a range of standards are progressively implemented between now and January 1, 2024, financial advice will come to more closely resemble other established and well- recognised professions, including accounting. 

A perceived narrowing of standards between financial advice and accounting has reignited the so-called “convergence” issue. The convergence of the two disciplines has been a supposed trend for decades;
it led to, for example, the creation of an accounting-practice-focused financial services licensee, Count Financial 35 years ago, which the Commonwealth Bank of Australia acquired in 2011 for $373 million, before selling it just eight years later to Countplus, for a mere $2.5 million (the business has reportedly since been valued at $40 million). Count has about 360 authorised representatives who are accountants that provide clients with financial advice. 

Between them, the three major accounting bodies (CPA Australia, Chartered Accountants Australia & New Zealand and the Institute of Public Accountants) have more than 300,000 members, a significant number of whom operate in public practice and must develop new services and offerings for clients in order to remain relevant. 

Closer to other professions

It continues to be suggested that accountants are more likely to offer financial advice services to clients as they become more confident that the standards that apply to financial advisers more closely mirror the standards they already meet as accountants. 

It follows that more accountants will add financial advice to their client offer or be more willing to enter into referral arrangements with financial advisers who meet new and significantly upgraded education, professional and ethical standards. 

Indeed, Countplus’s acquisition of Count Financial (expected to be completed in October 2019) clearly illustrates a belief that accountants are a natural source of financial advisory services and represents a vote of confidence in the development of the financial advice industry. It should be noted that Countplus managing director Matthew Rowe is also a board member of the Financial Adviser Standards and Ethics Authority (FASEA) (but is currently on leave of absence pending completion of the Count acquisition) and is a former chair of the Financial Planning Association of Australia (FPA). 

New financial advice standards developed by FASEA have the explicit approval of key accounting bodies, including CPA Australia and Chartered Accountants ANZ, notwithstanding additional study or upgrading of qualifications that may be necessary for accountants members; and notwithstanding the additional regulatory burden accountants face by being regulated by FASEA in addition to existing regulators. 

Faced with the time and effort required to upgrade their qualifications, a significant number of existing financial advisers may opt to not meet the new standards and gradually exit the advice industry. CoreData’s 2018 Future of Advice Market Intelligence Report highlights advisers’ intentions in this respect, noting that a combination of higher standards and the cessation of grandfathered conflicted remuneration puts around 42 per cent of advisers, by number, at risk of leaving the industry. 

However, since demand for financial advice is not declining, as a rapidly ageing population approaches retirement, the financial advice industry will struggle to replenish its practitioner stocks as incumbents move out and the pipeline of university-qualified graduates proves to be insufficient to replace them. This issue will be the subject of a separate piece of research by CoreData. 

This is an extract from the 2019 Market Intelligence Report – Accountants in Advice. To purchase a copy of the full report please contact Simon Hoyle on [email protected] or 0403448047

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