The recent weeks have shown that numbers of advisers dropping from the Australian Securities and Investments Commission (ASIC) Financial Advisers Register (FAR) have been driven by the accounting firms which offer limited advice support services and for which the financial advice is only a small part of their day-to-day work.
Given the Financial Adviser Standards and Ethics Authority’s (FASEA) requirements and the high costs were often the key reasons behind such a decision, the majority of the accounting firms who chose to take their planners off the register said it did not mean any intended cuts to their headcounts.
According to HFS Consulting’s director, Colin Williams, an interesting figure to watch would be the number of small accounting-based licensees which would remain in business post-FASEA exams.
“FASEA requirements are simply too onerous and costly for the return they get on the very limited advice they provide, so they are opting to give it away. My understanding is that they mostly operate on a restricted SMSF [self-managed super funds] licence or operate on a restricted basis under a licence” he said.
Money Management asked for a comment from Seamus Fennelly, director and compliance manager at SMSF Advisers Network, one of the biggest groups whose number of adviser roles fell by almost 50 only last week, and who confirmed that the main reason for the departure cited by his authorised representatives was the ASIC’s industry funding levy.
“Our advisers, who provide a limited scope advice (after the removal of the accountants’ exemption on 1 July 2016), are charged the same amount as financial advisers who run a financial planning practice so it did not make economic sense for them to continue to be authorised,” Fennelly stressed.
“The forecasted levy for FY 2019/20, which ASIC released in late June 2020, was $1,571, but ASIC’s invoice (issued retrospective) was for the amount of $2,426 per authorised representative. The concerns raised during our discussions about the levy was how much it will be for FY 2020/2021 given the increase to the allocated budget and the reduction in adviser numbers across the industry.”
According to the data from HFS Consulting, the number of accounting groups with limited advice advisers did not take off until 2016 and there was a rush of appointments in the years between 2016 and 2018 as accountants took advantage of the ability to provide limited advice to SMSF clients only via limited licensees from 2016.
Currently, they make up around 1,800 of advisers, the data suggested.
Further to that, the HFS’ data on the known passes of the FASEA’s exams among the advisers at accounting – limited advice peer group proved that they were way behind the broader industry.
Williams said that the number of passes for the accounting – limited advice (operating with limited services mostly for SMSF clients) was also very low compared to the main peer groups but, at the same time, other accounting based firms – peer group ‘accounting – financial planning’ who operated under a more holistic advice licensee, had a much higher pass rate than other limited advice accountants. Their rates however were still below the traditional financial planning sector.
“The numbers provide opportunities for existing holistic advisers who intend to stay the course. It is unlikely that any of the advisers in the accounting – limited advice peer group will lose their job, they will simply focus on accounting as for most of them, this is the largest part of their current job role,” Williams said.
“However, there will be a need to service SMSF clients and that is where qualified advisers will gain additional opportunities. The losses at a licensee level will cause some pressure, with a significant downturn in the number of advisers and at the self-licensed level, many of these licensees will simply be wound up. Life for most will return to what it was pre-2016.”