Many accountants fail to understand the “true value” of their business, says Radar Results principal John Birt – and the 1 July 2016 end to the so-called ‘accountants’ exemption’ to advise on SMSFs will give them an opportunity to unlock that value.
The traditional approach to unlocking the value of accountant clientbases has been via referral arrangements with financial planners, said Mr Birt.
“More often than not, this is done by a commission splitting arrangement with the financial planner paying a percentage of commissions received to the referring accountant,” he said.
“For some reason, it has been seen as good practice for the accountant and their clients to use an external financial planner. Why?” asked Mr Birt.
It makes “no real sense” to put a referral arrangement in place, and such an arrangement only works because of the strength of the relationship between the accountant and the client, he said.
“The financial planner simply plugs into that relationship, splits some commissions and that’s that, when in reality it should be the person with the relationship strength (the accountant) who should profit the most,” said Mr Birt.
The lower multiples of accounting practices (around one times recurring revenues) make it “attractive for the planners to pay the lower multiple, extract the financial planning upside and then re-sell,” he said.
“The changes coming in 2016 will force two camps to emerge. There will be those that continue to let significant value walk out of the door, and those that decide to become a part of the convergence that is happening and profit significantly from it,” said Mr Birt.
