Licensing for Accountants founder Kath Bowler has been involved with the regulations governing the provision of SMSF advice by that particular profession from its origins. She shares with Darin Tyson-Chan her concerns over practitioners now having to cram two years’ preparation for the new licensing rules into six months.
How did your involvement in the SMSF sector come about?
I think I fell into the SMSF sector. I’d worked with accountants and financial planners and I suppose the natural link is the SMSF advice they give, so that’s how I’ve ended up in that space. My real focus in the SMSF space was when I left CPA Australia in 2009 and started doing financial planning and it was within an accounting practice. They had no one to do their SMSF accounts, so they were going to outsource it and I said “no I’ll do it”. I’d never done any before, but I picked it up from there and subsequently thought I needed to get more involved in SMSFs. I then got headhunted to set up AMP’s SMSF Advice.
How hard was it to prepare your first set of SMSF accounts and why was it so important to you?
It was a bit of a leap of faith, but it wasn’t too hard. I have done things that were a lot harder. I knew how to give advice so I had the advantage over the accountants and I knew if I was in front of their clients, I would have the advice opportunity, but if I didn’t do their accounts, I wasn’t going to get that advice opportunity.
Your focus is now on the new licensing regime for accountants. How did that happen?
It began in 2000 when I started working at CPA Australia. It was when FSR (Financial Services Reform Act) first came into being along with the first exemptions, so I was around when those exemptions were included. I actually fought against being a specialist and to service a niche market. In the end I thought this is my niche and if I don’t give it a go now leading up to 2016, I’ll miss a great opportunity.
So what services does Licensing for Accountants provide?
Initially it was all about providing decision-making tools because the immediate issue was the decision-making process around licensing. But now the business is more about helping accountants get into the advice space, particularly the business advisory space. To do so they need to get licensed, but we also want to look at what else they need, like other tools and templates.
Is there one service clients are demanding the most?
It is changing, but I guess since Christmas the calls have suddenly come in wanting a solution and they are now looking at becoming authorised representatives or self-licensed and comparing the two as opposed to being quite fixed on one option or the other. So we’ve homed in on decision-making tools and how we can assist accountants to make the right choice. We’ve also picked up a lot of work in building advice processes with mid-tier firms. I thought they were potentially well serviced, but there certainly seems to be an opportunity for us and it’s a really exciting one.
Is the licensing process better understood now?
It is. Originally accountants thought they just had to put in their form and away they go. However, there is a better understanding of what’s involved in the licensing process now, but with that has come a little bit of hostility from accountants. They are realising the training equals the authorisation and they cannot get out of it.
With the licensing deadline of 1 July fast approaching, is it too late for accountants to begin the process?
It is not too late, but with each passing week and month the options become more and more limited for a whole host of reasons. They will not have enough time to do the training and that is by far the biggest one. I suspect what will happen is if they want to become authorised representatives, their choices will become limited because the good licensees will cherry-pick who they want and some will then just have to go with any solution if they want to be licensed.
Has the lack of urgency accountants have shown toward licensing surprised you?
The only surprise was the continuing lack of urgency in the last six months. I certainly wasn’t surprised about the apathy present at the start. There was a whole education process before they could buy in and they just didn’t seem to get this. I guess the limited number of successful licensing applications is reflective of the fact they didn’t understand the training requirements. The training has to be done before you can apply to be licensed or an authorised representative and it takes time. The volume of calls we’re receiving now is what I was expecting in July, but they are only just coming through. It means practitioners are cramming what should have been done over the past two years into six months. But everyone seems to leave things to the last minute and I’m no different.
Apart from the training requirements is there anything else accountants are struggling with in terms of licensing?
I think the thing they will have difficulty grasping is yet to come to be honest. So many of them think they can get licensed to enable them to do what they have always done, but they can’t give advice the way they’ve been used to. They are going to have to build a structured and documented advice process and to me that’s the bit that is yet to come. I don’t think they have got their heads around that fully.
Would you say there has been too much focus on the negative aspects of getting licensed and not enough on the positive ones?
Yes absolutely. However, there are a lot of accountants that can see the opportunity but just don’t know how to get there. There are so many factors present in their world beyond just licensing, cloud accounting and the like, and I feel they now they have to do something to take advantage of potentially a great business opportunity, but don’t know how to have the conversations with the clients as it’s way out of their comfort zone. It’s a bizarre situation to be in where you are an experienced business owner, but have your training wheels on again and they are now suddenly in this position. It is like being a doctor having to perform a procedure they have never done before, but is meant to be a part of their role. So they have to find a way to do it that doesn’t make them feel completely inadequate and uncomfortable.
Are you seeing accountants gravitate towards one licensing option over another?
It is a mixed bag and it is not even consistent across small and large firms. I am quite surprised at the mix and it has more to do with where the practice is with their advice journey as well and their referrals. So there is no consistency, small or large, and there is no trend emerging.
Is there any interest at all from accountants in becoming fully licensed?
No, because it’s just not an option and I don’t know why it’s put up as an option. There are so few people who could qualify. I mean you have to have experience as an authorised representative first, so that excludes 95 per cent of accountants. So I don’t think it should even be put up as an option because all it serves to do is confuse the issue.
What effect is CPA Australia’s licensing option likely to have?
I honestly don’t know what effect it will have. There are obviously some expectations regarding this licence and I’m sure some CPAs (certified practising accountants) are saying “well I will just go with that”. But my understanding is CPA Australia will be putting some fairly robust compliance procedures around it, as you would expect, to protect their brand. A lot of accountants won’t be able to meet these compliance requirements and this in turn will leave them in a situation of not knowing what to do. I don’t know how many CPAs are going to end up being disappointed.
Are any accountants likely to ignore the licensing regime altogether and continue to do what they’ve always done for their SMSF clients?
I am sure there are, but I am pleasantly surprised we have not seen that type of reaction to date. Perhaps they’re not telling us, but I do think it’s being taken a lot more seriously than perhaps I suspected. Even the accountants who don’t like it are prepared to fall into line in this area.
What’s the biggest change you’ve seen in the SMSF sector?
The new licensing rules for accountants for sure.
If you could change one thing about the SMSF sector, what would it be?
I’d change something about the licensing rules. I think it is possible to be able to produce advice documents for small business owners and SMSF trustees that doesn’t all have to be an SOA (statement of advice). There are accountants who don’t often document everything that has to be included in an SOA and I think a lot of advice is falling through the cracks because they do not have a suitable process and template to be able to do it.
In the year to come, what’s the greatest challenge for the sector?
I think it will involve practitioners determining their territory as to who is responsible for performing what role. So I think once accountants have become licensed, they’ll have to then figure out how they are going to use it. That step is yet to come.