With only a small number of accountants now licensed to provide SMSF advice, what does it mean for the industry?

In mid-2016, new licensing laws came into force, requiring accountants to be specially authorised before they can provide SMSF advice to clients. However, a surprisingly small proportion of accountants met the licensing requirements before the 30 June deadline.
So where does this leave the accounting profession – and what lies ahead?

According to Euan Sneyd, Count Financial’s National Head of Practice Recruitment, a marked division is likely to emerge between accounting firms who are branching into financial advice, and those who choose to stay where they are.

“We’ve been at a crossroad for a while now,” Euan said. “The new licensing rules are a game changer, and we’re going to see the industry move in a new direction over the next few years. On one side will be the tax compliance firms, and on the other will be firms that are looking to add value for their clients.”

Forward-thinking firms take the lead

Euan says the SMSF landscape is causing a split among accountants, with a small number of firms getting ahead of the curve.
“Around 10% of the accounting profession controls the majority of growth within this space¹,” he said. “Generalist accounting firms that only have a few SMSF clients will be impacted the most. Firms who manage more than 70 SMSFs will be the true winners because they’ll have in-house specialists who can identify new opportunities."

Euan points to automation and pricing as the key drivers behind this growing divergence. Forward-thinking firms are harnessing new tools and technology to run their businesses more efficiently, and many have moved away from traditional time-based pricing.
“By moving over to cloud-based technology, firms can spend less time administering SMSFs.” But if you don’t have a pricing solution or a value-added service to offer the client, you actually end up going backwards.”

To succeed in the advice space, firms also need to recognise that younger clients are looking for a new type of service. This means moving beyond traditional compliance work into more of a financial coaching role.

Euan commented: “The biggest group of SMSF trustees is in the 40–50 age bracket, and we’re gradually becoming aware that these people want financial advice differently. They’re goal seekers – and what they value most is someone who can help them understand what their goals are and how to achieve them.”

Who should get licensed?

In light of the new licensing rules, Euan suggests that running an SMSF arm might not be the best fit for every accounting practice. Instead, smaller firms might pursue alternative options rather than offering in-house SMSF advice services.

“Smaller practitioners just don’t have the scale, capability or technical know-how to do everything themselves,” Euan said. “There are many solutions that may work better for small firms, such as outsourcing or partnering with someone else who can provide those services on their behalf.”

Even in larger practices, not every accountant is equipped to give SMSF advice. Firms should therefore think strategically about where the individual strengths and capabilities lie within their teams.

“Licensing isn’t for everyone – financial advice requires a unique skill set that not every accountant has,” Euan said. “For example, within a three-partner accounting firm, maybe only two partners should become licensed. It comes down to each accountant’s personality and whether they’re comfortable having the right sorts of deep conversations with clients.”

Is SMSF advice right for you?

Making to move into advice is a big step, so it’s essential to go in with your eyes open. Here are five factors Euan believes every firm should consider before taking the plunge.

1. Age. “Younger accountants have a longer horizon to retirement, as do their clients, so they might be better able to adapt to change than someone who plans to retire within the next five years,” said Euan.

2. Understanding financial advice. Euan commented: “Firms need a good understanding of the complexity of advice, because it can be challenging to integrate advice into an accounting firm.”

3. Resourcing. “For every hour a partner spends giving advice, they need another hour of administrative support,” said Euan. “The firm has to have enough capacity to resource up the advice side of the business.”

4. Professionalism. “Advice sits within a rigorous regulatory environment, so you have to be committed to learning new skills and capabilities, while maintaining ethical standards,” Euan said.

5. Revenue and growth. “The costs associated with licensing is often underestimated by most firms – so you need scale within the accounting side of the business to support the financial advice side,” Euan said. “You also need a client base that’s big enough to help you recoup those costs.”

¹ Developing the SMSF Business Model of the Future, The SMSF Academy, 2016.