Accountants are unlikely to fill the gap in the ranks of financial advisers created by education and remuneration reforms, according to an advisory support service provider, which has claimed the former will not retrain to provide services in a market likely to decline in size.
Wealthdigitial policy and technical services manager Rob Lavery said accountants have been flagged as a solution to the shortage of financial advisers that will result from education reforms overseen by the Financial Adviser Standards and Ethics Authority (FASEA) and the end of grandfathered commissions on superannuation and investment products.
Lavery said any discussion around the probability of accountants filling a potential gap in the advice market did not consider that the reforms were likely to lead to a reduction in the demand for traditional financial advice services, and that accountants were unlikely to undergo another professional year to enter the advice sector.
He pointed out all existing advisers need to have passed the mandatory FASEA exam by the start of 2021, at which time grandfathered commissions will also cease to be paid to them, and then meet the new tertiary education requirements by the start of 2024.
“These two changes combined could see a drop in industry-wide adviser revenue of as much as 20 per cent and that is without ASIC banning life insurance commissions altogether,” he said, referring to a life insurance review also set to take place in 2021.
“The proportion of adviser revenue attributable to advice on super and retirement incomes was identified by the Productivity Commission to be around 35 per cent. In the most extreme circumstances it can be seen that while a large number of advisers may exit the industry, they are likely to be followed by a similar proportion because of the decreased demand for advice.”
The education reforms will require entrants to undertake a professional year, which would deter accountants who had already completed tertiary training and industry entrance requirements at the start of their working life, he said.
“Accountants are no strangers to undertaking a professional year. The question is, would established accountants be willing to undertake a second one to become a planner?” he said.
He noted that while new accountants could step into the advice area, they would have to complete a professional year for each discipline and the degree qualification requirements to become a planner.
“Rather than new accountants becoming hybrid accountant/planners, it is more likely that enrolments in accounting degrees will be cannibalised by an increase in enrolments in financial planning degrees. Rather than becoming both, budding professionals will choose one or the other and proceed straight down their chosen path,” he said.
“There is one potential joker in the deck and that is the possible reintroduction of the accountants’ exemption. In a review of the Tax Practitioners Board, Treasury identified it as one of seven options. In any event, such a narrow exemption would only slightly overlap with the advice industry.”