How many financial advice firms have grown out of accounting businesses?
There are, of course, the obvious accounting/advice firms such as Count Financial and CountPlus but there have been many less obvious firms such as Findex, and Premium Wealth Management, which is now part of Australian Unity, not to mention the advice businesses sitting inside accounting firm such as RSM.
Then, too, there was the less than stellar venture into the financial planning arena by major accounting body, CPA Australia, when it established CPA Advice.
So, the story of the convergence of accounting and advice has been long-running and one of some notable successes such as Barry Lambert’s establishment of Count Financial and some significant failures – that of CPA Advice.
However, for the principal of financial planning business brokerage, Connect Financial Service Brokers, Paul Tynan, putting advice businesses together with accountancy businesses remains a compelling model if you can achieve the right fit.
“The smart ones are doing it. The ones who are looking to pursue a progressive strategy and understand that consumers are looking to engage with a ‘trusted adviser’ without differentiating about whether that person is a financial planner or an accountant,” he said.
Given his background in accountancy and as the managing director of Adelaide-based mid-tier accountancy firm, Hood Sweeney, there can be no questioning the views of CountPlus chief executive, Matthew Rowe, who has been overseeing his company’s acquisition of Count Financial from the Commonwealth Bank.
Rowe strongly advocated for the acquisition of Count Financial because he is a believer in the convergence of accounting and advice in the new dynamic created by the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the exit of the banks.
An independent expert report provided to CountPlus shareholders to justify the Count Financial acquisition also reinforced the importance of convergence.
It stated that: “The acquisition will also increase the scale and diversity of the CountPlus business and is consistent with the increased market alignment expected between accounting firms and financial planning firms moving forward (as financial advisers are moving away from major institutions towards smaller independent businesses (including accounting firms) due to the changing regulatory environment)”.
But what do financial advisers really think about a further convergence of accounting and financial planning, in circumstances where recent history has suggested a level of dissatisfaction with the so-called accountants’ exemption and the subsequent limited licensing regime?
Also a factor is how advisers, particularly those who qualify as ‘financial tax advisers’ feel about the additional regulatory oversight entailed in answering to the Tax Practitioners Board (TPB)
According to a survey undertaken by Money Management in mid-July, as many as 45 per cent of advisers are working within structures which deliver both financial advice and accountancy but most are solely focused on the provision of advice.
Importantly, notwithstanding their cynicism about the capacity of traditional accountants, most advisers who responded to the survey (82 per cent) said they believed that the convergence of accounting and financial planning would continue simply because there were commercial advantages in the converged models.
Asked to explain their views, respondents appeared to reflect some of Tynan’s sentiments in suggesting that there were significant benefits to providing a one stop shop for clients.
One respondent put it in the following terms: “The economies of scale from having both professionals working on one client in the same room is hard to look past. I deal with more and more clients who have complex needs in terms of structuring and tax minimisation - it works really well when I have the accountant in the room. I think having in-house legal affairs will be the next logical step for a firm. We are looking to acquire accounting firms under our AFSL and establish joint ventures.”
Another said: “There is definitely an overlap of tax-related advice that financial planners and accountants provide. Being able to offer full services in both professions would enable our business to have more significant relationships with our clients.”
A further respondent said: “The current rules are crazy particularly where unlicensed accountants can’t discuss different types of superannuation etc. It’s true the previous rules were probably too open but accountants should be able to talk with people about options etc without providing financial advice and having to produce useless SoA’s at great cost to the end user. It would also help if some of the strictures on planners around compliance paperwork were moderated. Let’s get real so ordinary people can afford advice - this is far more important than product advice and is currently leading to all sorts of weird things being done to avoid having to be licenced.