By Daniel Archibald | CFA
The past decade has seen a number of changes to the regulatory environment surrounding financial advice. And most of these changes have been brought about due to the various scandals that have shown a degree of unsavoury behaviour that is well above the community's level of comfort. Some of these recent reforms include:
- Ban on commissions - this has seen the removal of conflicted remuneration from the advice surrounding investment and superannuation products (i.e. Is the advice given to benefit the client or the adviser?)
- Adviser register - a place where consumers can go to see details on their adviser including experience, education and past conduct issues
- Best interests duty requirement - apparently the duty that adviser's act in the best interests of the client needs to be legislated; Most would have thought that this was a given anyway
- Tax adviser registration - most financial advisers will need to register with the Tax Practitioner's Board to show they are competent in giving advice that relates to tax
- Accountant's financial advice registration - many accountant's will now need to be licensed financial advisers in order to provide advice around self managed super funds and other financial products
One result of these legislative changes is the blurring of the lines between accountants and financial advisers.
This is highlighted in the last two reforms listed above. In 2001, the Financial Services Reform Act was introduced. This act specified the regulated framework under which financial advice could be provided. One key component of this act was that accountants were to be exempt from these requirements as they related to self managed super fund advice. This exemption is now set to be removed as of July 2016. This will mean that accountants wishing to continue to provide advice in this space will need to become licensed financial advisers. Furthermore, from January 2016, many financial advisers will need to be registered as tax advisers if they wish to continue to provide financial advice that has tax consequences (most advice).
Over the years, a common query from clients to many financial advisers and accountants has been about the line between the services the two offer. In the short-term, these reforms are likely to blur these lines further, with a potential for consumers of advice to be confused about who to go to when they have a particular question. However, in the long-run, there may very well be benefits of such an overlap, with the possibility of finding all financial services needed under the one roof.
Those companies ahead of the game (i.e. those advice houses that already offer a full suite of financial services) might benefit from this short-term tumult. And hopefully in the long-run, consumers will more likely be provided with the quality and scale of advice that they rightly deserve.