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Accounting, Financial Planning

Accountants and planners will continue to converge

converge accountants financial planners

A boutique advice firm has predicted accountants and financial planners will continue to converge as the latter move away from being investment managers.

Accountants and financial planners are likely to converge further due to regulatory and economic considerations as the latter moves away from providing investment advice, the head of a boutique advice business has claimed.

Stanford Brown chief executive Jonathan Hoyle said the coming together of accounting and financial planning was already taking place with the former often being purchased by the latter.

“Financial planning firms are buying accounting businesses, it’s not the other way around, and this is being driven by their clients,” Hoyle said.

“Working clients are time poor and are telling advisers ‘You do everything else for me, you have got all my financial data, can you please file my tax return for me?’”

“So, they are being driven by a time issue but also a data security issue and clients increasingly don’t want to give their data to two firms and double their risk of being hacked,” he added.

Hoyle said the lower cost of acquisition of accounting firms with untapped client books compared to financial planning practices was also helping drive the convergence.

“Accounting firms have lower good will than a financial planning firm. A dollar of revenue in financial planning firms costs about 2.5 dollars and in accounting practice a dollar of revenue costs a dollar. So, dollar for dollar, they are 2.5 times cheaper,” he explained.

“Financial planning firms also look at accounting client books as potential clients because organic growth rates for planning firms have declined to negative rates. The royal commission has scared a lot of people off who needed advice and would like to take advice but don’t trust anybody in the industry.”

According to Hoyle, alongside the trend of convergence, financial planners would eventually move away from managing client funds and outsource the task to specialist providers.

“I expect in 10 years’ time most financial planning firms will not run money for their clients. Possibly the regulator will tell them they can’t, but even if the regulator doesn’t we are already seeing the existence of third party money managers aimed at investing money for planning firms that have no expertise in doing that themselves,” he noted.

“This is a trend that is well established in the US and the UK and is now happening here through discretionary portfolio management, which is a worldwide trend.”

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