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Securitor backs referrals for accountants

The removal of the so-called 'accountant's exemption' in 2016 does not automatically mean all accountants will need to become licensed as financial planners, according to Securitor.


BT dealer group Securitor currently offers accountants a range of licensing solutions ahead of the phase-out of the exemption, which currently allows accountants to advise on the set-up and closure of SMSFs.

But speaking to InvestorDaily, Securitor's manager for strategic growth/offer development, Stevie-Ann Dovico, said it does not always make “good business sense” for accountants to become licensed – and establishing referral networks may make more sense.

“The opportunity here is to bring wealth and accounting advice closer together in a way that ensures accounting and financial planning businesses still operate sustainably,” said Ms Dovico.

“The same outcome can be achieved by establishing a strong referral network between the accountant and financial planner or [by] bringing a financial planner in-house.”

Licensing accountants to provide financial advice brings with it all the complications of the FOFA regime, Ms Dovico added.

“That means increased administrative processes and burdens like writing a [statement of advice], which they haven’t had to do before. This process is not factored into their cost to serve, whereas financial planners have built this into their business model,” she said.

As a result, it often makes more sense for accountants to work more closely with financial advisers rather than becoming advisers themselves, according to Ms Dovico.

“Additionally, embedding a strong wealth presence into their accounting books adds an additional revenue stream and ultimately enables business growth,” she said.

“Considering that accounting firms sell at about 0.9 to one times revenue and financial advice businesses sell for about 2.5 to three times, integrating accounting and financial advice services makes sense,” said Ms Dovico.

David Lane, chief executive of CBA-owned dealer group Count Financial recently made similar comments about the benefits of ‘bolting on’ a financial planning practice to an accounting firm.

Asked whether he thought financial planning practice valuations would hold up until 2016, Mr Lane acknowledged “there is certainly pressure on them”.

But there is pressure on the accountancy side as well, he added, and valuations could sit at 0.7 times revenue for accountancy practices and two times revenue for financial planning practices in five years’ time.

Mr Lane maintained that adding financial planning to an accountancy practice was a “very nice business model” that would increase revenue and keep clients “happier”.

“It's a quite virtuous circle. You just take a bus that’s worth $1 million in revenues and now it’s worth $1.5 million and the extra [$500,000] comes from the financial planning side,” he said.

 

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