Future of Financial Advice (FoFA) reforms are set to impact the financial advice industry in a number of ways. A significant change for both financial planners and accountants moving forward is the removal of the accountant’s exemption.
Under FoFA, accountants will need to hold a licence to continue to provide advice to their SMSF clients. This in its own right creates a great opportunity for financial planners and accountants to work together. In the first instance, planners might see this as a bit of a threat in that there could be a lot of accountants coming into the market to provide advice.
There are between 35,000 and 40,000 public practicing accountants in Australia, and 90 per cent of them will be affected by FoFA and the removal of the SMSF accountant’s exemption. However, the professional accounting bodies estimate that only about 10,000 of that number will go down the licensing path. Importantly, these accountants will only be providing strategic financial advice, and not financial product advice, to their client.
This creates a gap in the market, in that where a client is not self-directed they will be looking for actual product recommendations from an adviser. This provides an opportunity for planners to work with accountants, who look after the provision of strategic advice, while the planner provides product or investment recommendations. We estimate that about half of the SMSF market in Australia is self-directed with clients who run their own share portfolio, while the other half will be in need of advice. However, the type of advice they will seek is more along the lines of ‘coaching advice’ as opposed to a holistic advice proposition.
The 25,000 odd accountants that don’t go down the licensing path also present a great opportunity for planners. While some of these accountants are likely to refer to specialise SMSF providers, it is also likely that they will provide referrals to financial planners to deliver SMSF and other associated recommendations.
Financial planners should be using the removal of the accountant’s exemption as a conversation starter with accountants, who will be looking to establish referral arrangements in order to service their clients moving forward.
In my next blog I will discuss how advisers and accountants can establish and build mutually beneficial referral relationships.
