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The move to require accountants to obtain limited AFSL licensing has turned out to be an absolute disaster, costing millions of dollars and putting accountants under unrealistic time pressures to achieve compliance.
Another part of this regulatory nightmare is that financial planners have also been required to become registered tax agents. Now, I can accept that financial planners and advisers need to be recognised as giving limited tax advice and should be required to meet appropriate education standards. But the requirement for financial planners to become Registered Tax Agents seems an unintended consequence of a poorly written piece of legislation.
So what is this all about? In part the accounting and financial planning professions have themselves to blame as this is a consequence of a “turf war” that has been raging since the mid 1980s, when banking was deregulated and the profession of financial planning emerged.
Unfortunately when demarcation issues like this arise and the government and the regulator get involved we finish up with more regulation. In this case the regulation is not only unnecessary, it is downright disastrous, causing conflict and added cost to the consumer.
Accounting and Financial Planning are separate and distinct professions, requiring specific and varied skill sets. Personally, I studied accountancy in my youth but have never practiced. I would not for an instant purport to be able to give broad based taxation advice as that is not my skill. I have a business partner who is a CPA. He has never practiced as an accountant and does not give broad based taxation advice as that is not his skill.
The reality is that all clients require and deserve the services of a good accountant, a good financial planner and a good lawyer. These professions are complementary and whilst there are some crossovers and grey areas, cooperation between them provides the client with the best outcome.
For over 30 years we have worked in close harmony with our respected professional colleagues. We don’t see ourselves as tax experts or legal experts in any way. We recognise there is a specific need for complementary professional services for our financial advice clients. This is particularly the case in respect to Estate Planning and taxation strategy.
I find it ludicrous that the outcome of the regulation is that it was considered necessary for accountants to become licensed to talk to their clients about things related to superannuation contribution strategies. This is a function of tax advice pure and simple and something accountants have been doing forever. That this has been equated to “financial product” advice is astounding.
And the fallout has been horrific. Take CPA Australia’s decision to become an AFSL licensee on behalf of its members. How could a respected professional body be so naive to put itself at considerable risk and cost in order to provide an AFSL licensing solution to its members? And of course the ramifications in terms of Professional Indemnity Insurance has become epic.
The level of education required to become either an accountant (CPA or CA) or a financial planner (CFP) is roughly the same – minimum Bachelor Degree and post graduate professional qualification. The notion that one can simply cover both disciplines competently is frankly ridiculous.
There is a need for common sense to be applied in relation to these matters. It needs to be recognised and acknowledged that there are going to be crossovers in advice areas and it should be up to the common sense of professional advisers to recognise those instances and refer the client to the appropriate professional for specific advice. There is absolutely no need for a limited licensing regime to even exist.
The government and the professional bodies need to revisit this and fix the shambles they’ve caused.
John Hewison is the Founder & Chairman of Hewison Private Wealth.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email firstname.lastname@example.org or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.