Accounting and financial planning practices must ensure their businesses are not dominated by a single service in order to remain competitive in financial services, particularly as the convergence of both industries in the advice arena increases.
At the Institute of Public Accountants’ National Congress in the Hunter Valley on Saturday, SMSF Professionals’ Association of Australia (SPAA) technical and professional standards director Graeme Colley presented on the future of superannuation practices.
“Is it going to be doing glorified bookkeeping or are you going to move into the areas where financial planning becomes an integral part of the business that you’ve got, either through acquiring a planning business or getting a licence in that area?” Colley said.
“If you’re an SMSF administration business, I think you’ve got to be very careful because if that gets wiped off the map tomorrow because of outsourcing and offshoring, you really need to diversify your businesses because it’s a very hard business to be in – it’s high volume/low margin and I don’t think that’s going to change.
“A lot of the best SMSF businesses, those that have a net profit of around $200,000 to $500,000, are far more diversified, provided far more deeper services to their clients and also they reaped the profits from the effort they put into it.”
On the other hand, there was a clear dominance of the accounting function within accounting businesses, he said.
“This means it is less diverse and less open to modify itself for any changes that come along,” he said.
“I suggest what with these changes to the licensing arrangements, if you’ve got a very sharp point, that is, you’re predominantly accounting and only a little bit into [other services] such as financial planning or general insurance or asset management, then there’s obviously not a great deal of diversity in the organisation.
“What you need to think about going forward is how you’re going to adapt to any change that comes along because maybe [it will mean] you’ll need more services out over here.”
SPAA research showed financial planning businesses were more diversified and better at modifying the way in which they conducted their business, he said.
“Therefore they may have a better chance of survival if the dynamic shifts towards accounting businesses,” he said.
“So I think the licensing arrangements are important to think about going forward and how you’re going to fit that into your business.”
