Waiting for the revolution
Mike Taylor writes that accountant licensing has thus far proved to be the revolution which has not quite happened but the clock is still ticking.
It was barely two years' ago that industry pundits were suggesting that the end of the so-called accountant's exemption and the introduction of a limited licensing regime would change the shape and texture of the Australian financial planning industry.
There was a belief that, no longer able to provide advice around the establishment of Self Managed Superannuation Funds via the accountant's exemption, accountants would swarm to become either partly or fully licensed and this, in turn, would alter the dynamics of the broader planning industry.
Indeed, it was a measure of that belief in accountant licensing that numerous financial planning groups, from large outfits such as the Commonwealth Bank's Count Financial to smaller players such as Premium Wealth Management, invested substantial sums in offering licensing conduits.
Now, as 2016 draws to a close, data compiled by the Australian Securities and Investments Commission (ASIC) on the take-up of accountant licensing confirms that the expected flood amounted to barely more than a trickle.
Fewer than 1,500 licenses had been issued by the regulator by the close of the last financial year and as the calendar year comes to a close that number remains below 3,000.
ASIC Commissioner, Greg Tanzer painted the picture as it stood in August when he said that since the transitional period had begun on 1 July 2013, ASIC received 1,159 applications for a limited AFS licence and that, of these, 366 had been granted a licence or had been offered a draft licence, 284 applications had been withdrawn or returned to applicants because they were incomplete, deficient or missed mandatory information, 507 applications were pending assessment, and two applications were refused by an ASIC Hearing's Delegate.
Since then, Tanzer has made frequent references to the need for accountants to refrain from providing advice in the absence of appropriate licensing, with the clear warning that ASIC is prepared to take punitive action where it detects breaches.
At a time when technology has been seen to be eroding the traditional revenue streams of many accounting practices, there has been much discussion about why more accountants have not pursued limited licensing more quickly, but former Premium Wealth Management chief executive, Paul Harding-Davis believes it was often simply a case of accountants believing that it might not ultimately happen.
"Many simply left it to the last minute," he said. "And I believe some weighed up the various elements and concluded that in their particular cases it was not worth it.
Count Financial chief executive, David Lane has been vocal in impressing upon laggard accountants the need to act quickly on licensing but he understands why many have been slow to act.
In a commentary published by Count, Lane said a lot of accountants were under margin pressure as their regular compliance work started to be outsourced, either digitally or to offshore providers but, at the same time, the new SMSF regulatory requirements were forcings them to put down their day-to-day work and take on extra education.
"So some accountants may have seen it as a burden rather than an opportunity, and had hoped the licensing issue will go away — which of course, it won't," Lane said.
The Count chief executive believes most savvy accountants will move over time to become licensed if they have not done so already, but he warns that there are stiff penalties for those who do not with the risk of reputational damage to the profession.
He said research showed that accountants were the most trusted subsector of the financial services industry and had done a terrific job in gaining that trust from their clients.
"However if the many accountants who currently provide SMSF advice outside of the regulated financial advice environment, they will jeopardise the reputation of the entire industry," Lane said.
In the meantime, ASIC is understood to be conducting surveillance to detect any breaches.
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