Advice stalwart cautions accountants ahead of new regime
Patrick Nalty
Accountants will need to earn a minimum of $300,000 per annum in order to successfully run their own Australian Financial Service licence once the accountants’ exemption is removed on July 1, 2016, according to a leading financial advisory firm.
Speaking at a seminar in Melbourne yesterday, Paradigm Wealth Management managing director Patrick Nalty said the best option for accountants was to either employ an experienced adviser to run their financial planning arm or partner with an established independently-owned advice business.
He warned against joining an institutionally-owned AFSL or applying for a full or limited AFSL.
“Accountants who decide to become an authorised representative of an institutionally-owned licensee will ultimately end up leaving once they realise that they have to comply with their dealer group’s compliance regime and approved product list,” he said. “The reason institutions own dealer groups and support advisers is to secure distribution for their products.”
Based on Nalty’s calculations, only large accounting firms with around eight partners and approximately $6 million in revenue will have adequate resources to properly maintain their own AFSL.
“There are onerous responsibilities attached with holding an AFSL and other intricacies which most accountants are unaware of,” Nalty said.
He cited as an example the free dispute resolution services available to retail investors if a complaint or dispute arises. Retail clients have access to two external dispute resolution schemes which can award up to $280,000 in compensation without legal representation. Conversely, clients who want to sue their accountant must take them to court.
Nalty added that professional indemnity insurance premiums were much higher for financial advisers and the new conditional license regime only allowed accountants to provide limited class of product advice.
“Accounting practices can continue providing quality advice to clients but be absolved of the additional responsibilities by entering a joint venture with an independent advice business,” he said.
While the majority of accountants aren’t expected to decide on which option to take until the start of 2016, Nalty said a number of accountants had already approached Paradigm Wealth Management about a potential strategic partnership.
The group, which employs 20 staff and has over $300 million under advice, specialises in SMSF advice and
administration. Approximately 70 per cent of assets under advice are in managed discretionary accounts utilising
the services of managedaccounts.com.au.
Nalty is the guest speaker at a series of seminars hosted by recruitment firm Lawson Delaney.
