Getting two-tiered advice

The recent ruling by the Australian Taxation Office allowing financial planners to give tax advice has blurred the roles of accountants and advisers even further. In the past, there was a simple division, meaning the accountant handled everything to do with tax, while the adviser handled investment and retirement advice.

Of course, what happened after the adviser talked about investments and retirement was that the client wanted to know the tax implications. Unofficially, most financial planners then advised them. As advisers admitted, they couldn’t stop a meeting to tell the client to go down the road and see a tax agent.

The outcome of this dilemma was that more accounting practices developed financial planning arms, and more financial planning firms hired accountants.

Moving into the advice market

Certified Practising Accountants Australia (CPA) manager of financial planning Chris Benson says accountants can give some strategic advice that does not specify a product. “If the accountant is not licensed [under the Financial Services Reform Act], it will limit the amount of advice they can give,” he says. “We encourage accountants to become proper authority holders and offer advice.”

Benson says the CPA has been actively encouraging its members to be ready for an advice-driven world, and to adopt financial planning in their practices. He says the association is also telling its members to find a way of providing financial planning advice, which could be through alliances with financial planning firms or by training a member of staff to provide advice. “We encourage members who are involved in financial planning to have the minimum competence, which is PS 146,” he says.

“The challenge is to encourage members to undertake courses for these standards, as that is what the profession should be working towards.”

Chris McMillan, education unit general manager at the Financial Planning Association (FPA), says the association has been working towards creating greater competency in providing tax advice. “We have tax incorporated in the advanced diploma of financial planning,” she says. “This covers everything — tax offset, CGT, exemptions, estate planning and gearing — all the competencies needed at a required level for financial planners.”

McMillan says tax is also covered in the Certified Financial Planner (CFP) course for financial planners. This applied strategy unit covers tax in relation to estate planning, superannuation, trust tax structures and salary packaging. “There really is a fairly hefty focus on tax,” she says. “In the CFP three unit tax issues are covered, and that includes income streams, pension and annuities, and there’s a very heavy emphasis on expatriate tax.

“I looked back at an earlier version of CFP, more than 18 months ago, and found there’s a lot more on tax now in the syllabus.”

A well-rounded education

There is also a new breed of financial planning course being developed at universities.

The University of Western Sydney (UWS) will be introducing a Bachelor of Financial Advising course next year. This course will cover the changes in the financial services industry, with more emphasis on taxation and financial law.

It will cover areas such as financial planning, retirement and estate planning, superannuation, insurance, ethics, compliance, accounting, practice management and law.

The degree will allow the student to gain the technical expertise necessary for registration as a tax agent and certification by bodies such as the CPA, Institute of Chartered Accountants and the FPA. UWS senior lecturer Ray Neale says the course is aimed at students interested in careers in the financial services industry, specialising in the areas of accounting, taxation and financial advice.

He says there are few degrees currently available designed purely as a financial advisory degree. “Most courses tack financial advice onto an existing course, which could be a commerce or accounting degree,” Neale says. “This course seeks to equip students with the ability to provide overall integrated financial services.”

The course is not just theory and will provide students with practical industry experience. “The undergraduate will develop skills that are needed for the industry, such as creating a financial plan,” Neale says.

“We are replicating what happens in the industry and are trying to blend theory and practical work.”

Updating skills

Benson says the CPA has just relaunched a booklet, which explains what an accountant needs to do to offer advice under the Financial Services Reform (FSR) Act. The guide covers areas such as when a licence is needed, what is not covered by FSR, and the provision of providing advice to self-managed superannuation funds.

There is a supplementary guide for accounting firms on how they can incorporate financial planning into their practices. “We have spelt out what the options are, and what might lead to the accountant becoming licensed to give financial planning advice,” he says.

McMillan says the FPA is running continuing professional development activities to top up the level of knowledge for financial planners in specialist areas such as taxation. “The FPA has successfully run courses this year in conjunction with the Australian Tax Institute,” she says. “It is a chance for financial planners to broaden their base and offer more holistic advice.”

Business opportunities

Benson says providing advice is creating opportunities for accountants, and has been so for many years. “Some accountants saw the opportunities up to 15 years ago and redeveloped their practices,” he says. “Even back then, some accountants saw there might be opportunities for advice, and worked on identifying strategies for providing advice.”

Benson says the recent Productivity Commission report on the ageing population has confirmed there are huge financial planning opportunities in the future. “The ageing population means it will be more difficult for the government to provide recurring benefits to them in retirement, so they need advice,” he says. “Accountants have provided tax advice to this group, but now they want advice on how they will plan for their retirement.

“Accountants who cannot give advice will see clients turn away, and they will lose them.”

Benson says these issues will change the profile of accounting in the future.

“As clients want advice, practices will lose clients of 30 years standing as they look for advice,” he says.

“A lot of accountants will have to adjust to that fact, and we are here to provide guidance to the member who wants to move into advice.”

Neale sees financial advice as a growing sector, not only in financial planning dealerships, but also in accounting and legal sectors.

Universities are already holding financial planning courses for accountants and lawyers.

“The traditional financial planner is going to find more competition in the future, and the people joining the accountants and lawyers are going to be very qualified,” Neale says.