When it comes to providing advice, no-one likes it when someone moves in on their patch, especially when that person comes from another field or profession.
But this is at the very heart of what keeps many accountants from striking professional relationships with financial planners, with the biggest complaint being that financial planners give tax advice.
And while this may seem part of every financial plan, it is one of the chief things that bother accountants who claim that advisers are not always up to speed on the latest tax issues and that some investment advice can lead to problems.
Institute of Chartered Accountants in Australia(ICAA) financial planning technical consultant Craig Dangar says this issue of who owns the tax turf is one of the largest sources of concern by ICAA members.
“One of the biggest gripes we hear about is tax advice because once it has been taken as part of a financial plan it can be hard to fix,” Dangar says.
“Often it means the sale of an asset to recover from poor advice and it is something we see once or twice a week. This indicates to us that financial planners have strong product recommendations but often these are not always in the best interests when it comes to tax.”
Dangar says the reason for this stems back to the different backgrounds of accountants and financial planners, where financial advice has in the past been remunerated based on the product and not the advice itself.
“This type of behaviour is a large source of complaints with salary-based planners in large institutions who are usually inexperienced, with lower levels of training and sales being some of the main culprits,” Dangar says.
According to Dangar, the more educated and experienced an adviser is, the less thorny the issue of tax becomes for accountants, but whether this is because the planner has learnt some tricks over the years or because they are leaving it well enough alone, is not clear.
CPA Australiafinancial planning manager Kath Bowler says the reason for much of the angst between the two professions is due to different styles which are not always reconciled.
“Accountants are advice based and so have no desire to be product focused or involved with product promotion and at the same time, value their independence, so they will usually seek smaller, independent advisory groups to work with,” Bowler says.
“Accountants also have strong relationships with their clients and anything which adversely affects that reflects badly on them.”
Dangar says planners and accountants can work together but both parties need to know their own limitations, which means going back to the source of the client.
He also says it is always important to remember why the relationship was set up in the first place and that once clients are put in boxes without any cross consulting between the two professions, there will be problems for all concerned.
“Most relationships between accountants and planners just don’t get off the ground because while they would like referrals from each other, the expectations and understandings are not being fulfilled. This happens because it can be hard to figure out where the lines should be drawn,” Dangar says.
It is a view also shared byProfessional Investment Services(PIS) managing director Grahame Evans, who heads up the group’s 1,200 accountants, planners and risk advisers.
“It is often stated that when accountants and planners get together, they are still degrees apart in their thinking but their interests are aligned, so they have to work together,” Evans says.
“Yet the best way to destroy any trust that is established between two professionals is to not communicate fully regarding each other’s actions.”
But Evans says there are a number of ways to ensure professional relationships never progress to that point and he says all relationships should be based on systems and processes that are written as well as spoken about regularly.
He says accountants, like planners, want a level of control over clients and processes which is only available through communication which “should be thorough and often”.
According to Evans, this should be underpinned by a number of important documents. This includes a business plan outlining what the professional relationship is aiming to achieve, contractual documents outlining the obligations of each party and a pricing policy.
The pricing policy would apply to both accountant and financial planner, and cover all aspects or remuneration from clients and should be agreed upfront, according to Evans.
“Accountants understand a fair reward for fair value and for many, the method is not critical as long as they are aware of what is going on before clients are referred,” he says.
“The most important thing is that they are treated as an equal in any relationship and not disenfranchised as those who supply leads to a financial planner. The best course for a planner is to include them in everything and allow them to opt out,” Evans says.
Bowler says while the Financial Services Reform Act (FSRA) has provided much work for both accountants and financial planners, it will also provide further opportunity to build business relationships.
“Under FRSA, accountants will need a financial planning solution whether it be in-house or external, so this is a good opportunity, but it will still be a trust relationship,” she says.
