Are Accountants in the box seat? Implications from the Professional Standards of Financial Advisers

    On the 3rd of December 2015 the Federal Government released some draft legislation that may be of interest to Accountants (and most definitely to the broader financial services industry).  

    The legislation released is the "CORPORATIONS AMENDMENT (PROFESSIONAL STANDARDS OF FINANCIAL ADVISERS) BILL 2015".  This document has received little media attention to date and I think it's worth exploring a little further.  **Important note - this legislation is still in draft form with the consultation period closing on 4th January 2016.

     What's it all about?

     Under the proposed legislation:

    • New financial advisers will require a degree, undertake a professional year and pass an exam.
    • The Government will recognise an independent industry-established standard setting body, operational from 1 July 2016, which will develop and set education standards, professional year requirements, continuing professional development requirements and develop a comprehensive code of ethics for financial advisers. 
    • Existing advisers will be provided a transition process and will be required to complete an appropriate degree equivalent (or have a recognised transition pathway determined by the independent standard setting body) and pass an exam.
    • All advisers, both new and existing, will be required to undertake continuing professional development (CPD) and be party to a code of ethics.
    • The new education and training requirement will be effective from 1 July 2017, with the code of ethics requirements coming into force from 1 July 2019.
    • There will be a restriction on the use of the titles ‘financial adviser’ and ‘financial planner’.

    ** Existing Advisers are defined as those advisers who were (Authorised Representatives) immediately before 1 July 2017.

    Why is this important?

    Based on my experience, the majority of Accountants already hold one of the 3 key requirements - a Bachelor Degree (or equivalent).  If they become an Authorised Representative on or before 30th June 2017 then they will not need to undertake a Professional Year (as currently stated in the draft legislation).  That means if an Accountant becomes RG146 compliant, and attains their own AFSL or become an Authorised Representative under an AFSL on or before 30th June 2017 then they will only be required to sit a national exam (and have a 2 year period from 1st July 2017 to do so).

    That, to me, says Accountants really are in the box seat.  Anecdotal evidence suggests only the minority of existing Financial Advisers hold a Degree or Degree-equivalent qualification.  What will happen to these Advisers under the proposed regime? I think it's safe to assume there will be some who will simply find it too hard or unnecessary and leave the industry.  

    To what level?  Who knows.  But the important aspect is that it means Accountants can position themselves to take on more clients and increase their business value, simply by being well-positioned to take advantage of proposed transition arrangements.

    It's about where you want to take your business, NOT about having to do RG146 training and licensing?

    The business savvy Accountants can see what is coming - online tax returns, a reduction in compliance work, self-educating clients, and a convergence of traditional Accounting and Financial Advice work.  

    These same Accountants can also see that they are potentially in the box seat - many have a client base relatively untouched by financial planning, they have developed trust over the years with their clients through the provision of strategic solutions (not products), they are Degree qualified meaning they have already met one of the new benchmarks, and they understand the importance of being able to offer a broader range of solutions for their clients - it benefits the client and, importantly, it provides the foundation for future strategic business direction and underpins long-term business value.  The asset they have worked on most of their lives.

    1st July 2016

    This is the date when the game really starts to change.  

    The Accountants' exemption ceases, the Professional Standards of Financial Advisers legislation comes in to force (as currently proposed), the Industry Standards Body will be established, and existing Advisers will need to decide on what educational pathway they need to undertake (or start thinking about whether they will remain in the industry from 1st July 2019.)

    The purpose of this post is simply to highlight the planned key legislative changes that will shape the financial planning industry in the years to come. There are many great Financial Advisers who will meet these challenges head-on and achieve great success.  Similarly, Accountants who choose to strategically position their business to take advantage of the opportunities ahead do so from a fortuitous position.

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