MPA talks to the broking industry and accountants about what CPA Australia Advice spells out for them, and for you
Brokers, you can hold on to your market share – we’ve heard from accountants-turned-financial advisors that they prefer to refer.
You may have heard of or read about your fellow brokers’ dismay or delight – or even added your own thoughts to the fray – after CPA [Certified Practising Accountants] Australia announced in early June their plans to enter the financial advice market under a newly launched subsidiary company, CPA Australia Advice.
Because CPA Australia is one of the largest global accounting bodies with a membership exceeding 150,000 across 120 countries, concerns quickly spread that accountants turning to financial advice would become a threat to the broker channel, rather than remain the valuable referral partners they have been for a long time, and do nothing short of dive headfirst into loan writing, rubbing their hands with glee.
Responding to this alarm, MFAA chief executive Siobhan Hayden was quick to clarify the situation with CPA Australia and stressed that CPA had made no such indication to prompt their members into mortgage broking.
“What they’ve announced is a plan to get an ACL and an AFSL, and the reasoning behind that is the changes to legislation at the end of this financial year that would preclude them from doing the work they currently do today,” Hayden says. “They’re applying for both licences to ensure that they can continue doing business as usual.”
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Indeed, the announcements from CPA Australia point more toward the planning space within financial advice than anything else. According to CEO Alex Malley, “Our new company will also be consistent with APES 230, the accounting profession’s standard for members engaged in the provision of quality and ethical financial planning services.”
MPAspoketothetwoindustryassociations, an aggregator, three accountants and a broker
to gain a rounded insight and discovered a unanimous response that brokers shouldn’t expect to lose large chunks of their business to one of the largest global accounting bodies anytime soon. Here’s why.
It’s nothing new, associations say
First, accountants have been crossing into financial planning and broking for a long time. “Finance brokers have been working with accountants for decades,” says FBAA chief executive Peter White, outlining the three common methods accountants have historically used to expand into broking, depending on their business model: Large firms may set up a separate division, medium companies might have a strategic alliance and outsource to a broker, and small businesses may choose to take it on themselves. But accounting, financial planning and mortgage broking are separate professions in their own right, which doesn’t make for an easy transition.
“It’s a very challenging thing to do,” says MFAA’s Hayden of accountants taking on broking. “I’m not sure there’ll be a high percentage of accountants who are writing loans, if that’s ever what they choose to go down the road with. I think what the industry has shown is that the best manner in which to do that is through partnering with the right professional to help with your customer.”
CPA Australia Advice plans to become operational in 2016. “We know that the big financial institutions, some of the biggest companies in Australia, dominate this sector, but we believe Australian consumers seeking financial advice deserve a fully transparent and independent alternative,” says CEO Malley.
But White is concerned about the conflict of interest involved if an accountant also is wearing a second hat as a broker, even though Malley has stated there will be “no commissions, no hidden incentives, no asset- based fees – just pure and transparent
“I question the transparency of it,” White says. Even though he believes the
Nonetheless, White says brokers won’t lose business if they provide a quality service. “If you’re doing your job fantastically well as a finance broker, you’ll have very little to worry about. If you’re not doing your job particularly well, then you’ve got bigger risks than you realize.”
The bottom line is that CPA is looking to provide a superior customer experience, Hayden says, which at the end of the day is the main focus.
Outsource speaks out
To an extent, broking and other financial services are already integrated, particularly through referral partnerships. Boutique national aggregation group Outsource Financial provides lending services to professional groups, including financial planners and accountants, plus legal firms and licenced conveyancers.
“At Outsource, for 13 years, we have been saying that we honestly believe that a component of lending should be driven by the accountants and the planners,” says CEO Tanya Sale. “This is the new era; it’s the professional services sector, like the accountants and the planners, really paving a way into the mortgage broking market.”
Sale can see why some brokers may be anxious if they are heavily reliant on accountant or financial planner referrals for business. But she says it is inevitable that the two professions would step into the industry, as financial planning and lending are logical
“The planners and the accountants were always coming into this industry, always, so nothing’s really changed,” she says, “except that it’s probably being
What accountants are saying
The accountants we talked to have all delved into financial planning, but did not think the majority of accountants would choose to be financial planners – and mortgage brokers, even less.
Alan Maddick, CEO of large accounting group MAS Tax Accountants, is a qualified financial planner and accountant, but when it comes to broking, he believes the referral model is best. “The ideal scenario still is an accountant in some form of referral relationship with a skilled mortgage professional – and most accountants recognize that they can’t be everything for everyone.”
He explains only a few of their staff have dual roles. “The reality is, it’s better to be a dedicated financial planner or a dedicated accountant; it’s very hard to do both.”
As they are in the middle of securing their own AFSL licence, Maddick doesn’t see CPA’s plans having a big effect on his business. “There’s turbulence and change in financial services, and there has been basically since 2003 – ever since financial services reform came in. It’s just constant evolution and regulation. Financial planning has been around for a long time; a lot of accountancy firms are financial planning firms already, and those that aren’t probably don’t want to be.”
Like Maddick,
“I love accounting, but I saw the need of providing holistic financial advice to our clients, and ... our clients are absolutely loving it. I think due to the compliance, accountants don’t tend to do it – they can do it, but they don’t have the time to do it. [Financial planning] is a very different space to get into. I don’t think a lot of accountants want to be financial advisors. I don’t think that that’s necessarily the avenue they want to go down.”
Homann has a strong relationship with Outsource Financial and refers many loans their way, maintaining regular contact with a commercial lending manager and an investment property/SMSF manager.
“Originally I did think that I would have [broking services]
Hanrahans Accounting Services is another company that won’t be directly impacted by CPA Australia’s expansion as holders of their own financial services licence. However, financial advisor and former accountant Eleanor Hanrahan says she can see how CPA providing the licence to its members would be beneficial.
“For accountants who haven’t already branched into that area, it would be a great segue for them to transition into the financial industry because there is a lot of difficulty initially to get your own financial services licence. They’ve taken out that middle step for a lot of accountants to transition through them to offer financial services.”
These accountants-turned-financial planners don’t see brokers as competition, but rather respect their expertise and the value of a strong referral partnership. Brokers have the opportunity to strengthen this outlook further by continuing to raise their value proposition, making it more likely for accountants exploring financial advice to keep the loanwriting component referral-based, rather than taking it on themselves.
A broker’s perspective
Oxygen Home Loans is an 11-year-old brokerage that did offer financial planning in
the last four years before it was sold. “It was more because it was a distraction than anything else,” says general manager Alan Hemmings. “I don’t think the two can work together completely.”
Hemmings also doesn’t see CPA Australia’s move having much impact on his brokerage, nor is he worried that brokers will lose financial planning business or referral relationships to accountants. “[Broking, planning and accounting] are three distinct skill sets,” he says. “Is someone going to want to sit in front of a person who does their tax and that sort of thing and then also sit and have the conversation around investing with that person and then also do the borrowing through that person? I’m not sure – I know I certainly like to keep the three apart.”
For now, the industry can only speculate on the details of CPA’s new venture, and at the time of publication, the accounting body was unable to provide further information, as the new company was still in the process of securing an Australian Financial Services Licence [AFSL] and an Australian Credit Licence [ACL].
The industry players we talked to recognise that beyond CPA Australia’s plans, broking, planning and accounting will likely continue to converge, which will provide opportunities for generalists and specialists alike who choose to seek them out.
