Government accelerates decline of planners and accountants – economy employment and consumers suffer 

From

Sam Zervides

The growing calls for government to stop interfering, over-regulating and irreparably harming the important financial planning and accounting sectors continues to fall on deaf ears with the economy, employment and consumers equal losers.

Planners and accountants could accept the decline in their livelihood if it was the result of new technologies, outsourcing, overseas competition or product innovation.  But it’s a bitter pill to swallow when it’s the result of relentless and incoherent reform and imposition of government red tape, over policing and escalating compliance costs.

Costs that are making the provision of affordable professional financial advice and services harder and harder to provide for clients – whilst simultaneously driving practitioners out of the industry.

The financial planning and accounting professions are predominantly comprised of SMEs.  Collectively they’ve been severely impacted by government-initiated reforms with the large institutions, fund managers and industry funds the major beneficiaries.

The legislators and advocates of industry reform have no appreciation or regard for the damage they’re inflicting and legacy being left in their wake.

In the June quarter alone 1,750 (or 6.4%) financial planners exited the industry, leaving just 25,470 practitioners across Australia.  What does this entail in real terms?

  • 1,750 SMEs financial advisory businesses ceased
  • 5,250 administrative staff unemployed or required to relocate if practice has been sold[1]
  • 525,000 Australian consumers impacted[2]

If 6,000 plus planners exit the industry before 2024 as projected – it will impact 1.8million financial service consumers!  These estimates are absolutely mind numbing – and the impact on the SME sector, employment, economy and the financial welfare of affected consumers incalculable!

Accounting practices are also being decimated. July 2016 heralded the end of the dominance of accountants in self-managed superannuation – and access by consumers to an affordable, low cost, savings, investment and retirement vehicle.

The vast majority of accountants chose to cease this service and lost an important revenue stream as the cost of obtaining an AFSL and associated compliance and ongoing PD requirements were far too prohibitive.

As a result, the era of low cost SMSFs ended abruptly leaving clients no option but to abandon or restructure their SMSFs – or revert to an industry, retail or corporate fund – all at significant cost.

For practitioners that want to continue operating as SMEs in their chosen profession as planners or accountants – they should firstly forget about government benevolence and support.  Even though the Hayne Royal Commission exposed many failings in the activities of the large financial institutions – they will continue to be the ongoing beneficiaries of government policy.

Yet there is a solution for accountants and planners.  Many of their offerings overlap and they can continue to remain viable profitable enterprises by joining forces to deliver holistic relevant advice and value for their clients.

By working together in JV or alliance partnerships, the immediate benefit will be economies of scale, reduced costs and sharing resources to collectively assist clients address complex wealth creation, retirement, lifestyle protection and intergenerational wealth transfer aspirations.

Under current rules unlicensed accountants can’t discuss financial product related matters.  But doing so in conjunction with a planner providing the compliant SoA is an efficient, cost-effective framework that transforms the status of the accountant and planner to ‘trusted business partners’.

The power of the ‘trusted business partner’ will be realised through the alliance and creation of more comprehensive, cost effective, services and facilities, that in turn will enhance and deepen relationships with clients.

To this end, planners and accountants will be working more effectively and efficiently; have capacity to take on more clients; and charge appropriately, for providing greater value to their clients.

Although operating a professional advisory business in this challenging environment can be difficult – there still exist opportunities to operate sustainable and profitable enterprises.  The great differentiator is personal, professional, cost effective service that is something the large institutions and industry funds can’t provide.

By Sam Zervides, Principal

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[1] assuming 3 staff members per practice)
[2] assuming 300 clients per planner

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