For accountants, 2016 has been a year of interesting challenges and exciting new opportunities. As we enter a period of significant change, there are a number of considerations for accountants to take into 2017.
The most significant change in 2016 was to licensing rules for SMSF advice. Despite the rules around SMSF licensing changing on 1 July this year, only a small percentage of accountants have taken the necessary steps to become licensed.
Of the 32,000 or so accountants in public practice in Australia who service SMSFs, only 4000 are authorised representatives of a licensee, with a further 1500 operating under a limited licence. This leaves around 26,500 accountants who can no longer legally advise clients on self-managed super, according to Investment Trends research.
So what does this new world mean for accountants? Well, it’s an opportunity to diversify their business, but it also poses a significant threat.
Many accountants are under margin pressure as their regular compliance work starts to be outsourced, either digitally or to offshore providers. At the same time, they are busy looking after their current clients and focusing on running their businesses well.
Many regard the licensing change as an unnecessary burden that forces them to put down their day-to-day work and take on extra education, while others hope the licensing issue will go away – which of course it won’t.
On the other hand, some accountants are being very astute about how to build their business by providing value-added services to their clients. They recognise financial advice as an opportunity to help take care of their clients’ more complex needs and they regard education as an investment in their future.
It’s a shame so many accountants may not realise the significant risk to their business and reputation if they provide financial advice without being licensed.
Accountants have done a terrific job in gaining the trust of their clients and Roy Morgan research shows they are the most trusted sub-sector of the financial services industry. However, those who provide SMSF advice outside of the regulated financial advice environment stand to jeopardise their own reputation as well as that of the entire industry.
It’s important accountants who haven’t become licensed don’t establish any SMSFs or provide SMSF advice while they’re unlicensed. If they want to continue working in the SMSF space, a temporary solution could be to partner with a financial adviser and outsource their SMSF work while they undertake the training they need to get licensed.
It’s important to remember it takes around six months to complete all the education requirements to become authorised, so the challenge for those accountants will be to find a short-term arrangement with an adviser they trust while they work towards a longer-term solution.
Another consideration for accountants is whether they’re doing enough SMSF work. If they’re only doing one or two SMSF transactions a year, it might make sense to just outsource their SMSF work as the need arises.
Accountants are very well networked, so as an industry we need to help bring forward those who have yet to make the move – and that means showing them what the opportunity looks like.
Once accountants understand how they can support their clients in more meaningful ways, which in turn will help drive further revenue for their business, it becomes a much easier decision.
Since accountants have so many clients who trust them, they’re ideally positioned to offer financial advice. And if they can make the shift effectively, accountants have the potential to become the premier financial advisers within the industry.
But at the end of the day, these accountants need to make their own decisions – and it’s up to the industry to support them however we can.