Melding accounting and adviceHow to get future ready in a digital world

Executive introduction

Expand your value proposition

Develop EQ not only IQ and sell yourself

Select the right business model and licensing option

Get in touch with GPS Wealth

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November 2016

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Up to 40 per cent of the work accountants have traditionally done is increasingly being done by cloud-based computer programs and cheap, highly-qualified bookkeepers.

This trend, combined with the increasing popularity of the Australian Taxation Office’s pre-filling service which automatically gathers information about a person’s income, expenses and previous tax return data to complete their tax return online, means accountants need to continuously enhance their value proposition in order to stay relevant, justify their fees and build a vibrant, sustainable practice.

It’s easy to see why many accountants feel concerned about digital disruption but there’ll always be a place for professional tax agents who can help clients maximise their tax deductions and correctly

and add greater value by offering financial services like insurance, lending, budgeting and cashflow management, strategic advice, retirement planning and estate planning.

In the future, the most valued and valuable practices will be those that not only help clients legally minimise their tax but help them to protect their assets using different company and trust structures, grow business revenue and profitability, and maximise their wealth.

By doing so, they can become an integral part of their client’s life, and not only at tax time.

This paper provides practical tips and fresh insight on how accounting firms can build a compelling, relevant proposition to safeguard against competitors.

Consumers increasingly want and expect more from all their service providers. As their most trusted adviser, accountants are in pole position to meet their needs either in-house or by referral.

Accountants don’t necessarily need to study and retrain extensively. The solution may simply be to form referral relationships with other professionals like solicitors, financial advisers and mortgage brokers to facilitate and oversee the delivery of a comprehensive service package.

That will enable accountants to lift client engagement and retention, gain greater control over their clients’ third party relationships, and put a ring-fence around them.

In my role, I commonly come across accounting firms who are losing clients to practices that offer a broad range of financial services. Their clients weren’t unhappy. In fact, they were typically highly-satisfied,

complete and lodge their returns on time.

People “don’t know what they don’t know” so accountants can, and do, save them thousands, if not hundreds of thousands of dollars.

But a look at what’s happened to the hotel, taxi, stockbroking and media and entertainment industries in the past decade demonstrates that no one can afford to stand still. Digital disruption will destroy businesses that are inefficient, inflexible, expensive, and provide a low level of service.

The only way to combat it is to continuously add value, and grow organically by steadily increasing fees in line with increasing value.

This White Paper examines the enormous opportunity for accountants to expand the client relationship

longstanding customers with no issues about the services they received or fees they paid. They simply left because they were referred by a friend or family member to a practice that offered broader services like insurance, lending and financial planning at a time when they needed it.

The stars are aligningAs a result of digital disruption and changing consumer demands, the opportunity for accountants and financial advisers to work together has never been bigger. In light of the recent removal of the accountants’ exemption, the stars are aligning now more than ever.

A highly-skilled, professional accountant and highly-skilled, professional adviser is a powerful combination. Both parties recognise that it’s impossible for them to be all things to all people, and they value and respect the other’s specialist skills and experience.

They also realise that together they can deliver improved client outcomes, leading to higher levels of job satisfaction and client satisfaction, more referrals, stronger revenue and sustainable business growth.

The only caveat is that they need to find the right referral partners. It’s critical for accountants to only refer professionals that will complement and respect the existing client relationship but identifying those people is challenging.

With the help of an experienced Australian Financial Services Licence holder, or dealer group, that can be achieved.

This paper aims to encourage more accountants to leap into financial services by showcasing the opportunity before them so they can take the first step towards future-proofing their business.

Executive introduction by Greg HolmanAccounting practices which move into financial services early can get a big jump on their competitors and demonstrate that they are a true leader in the accounting profession.

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There’s very little separating most suburban accounting practices. Whether a person uses ‘Accountant A’ or ‘Accountant B’ to complete their tax return is much of a muchness. Fees are largely comparable too.

Even if one practice dropped their fees, competing on price isn’t a sustainable business model. There’ll always be another practice (or computer) that can do it cheaper which is why accountants need to focus on adding value.

To do so, savvy practitioners have been steadily adding financial services to their mix. Many firms now enjoy a deeper, multifaceted relationship with clients and a diversified, growing revenue stream. When

the time comes to sell, they’ll be able to command a higher price.

This development has coincided with the strong growth of the self-managed superannuation fund (SMSF) sector.

Accountants are key providers of accounting, auditing and administration services to SMSF trustees (see breakout box: Life after the accountants’ exemption). Many have branched out further to help investors protect their assets, grow business revenue and build their wealth.

At GPS Wealth, this holistic service offering has been given the acronym T.P.G.W which stands for: Tax, Protection, Growing revenue and Wealth management.

Expand your value proposition

Accounting practices that resist change and refuse to embrace financial services will ultimately get left behind.

Move at your pace Accountants have nothing to lose and a lot to gain by expanding into financial services, provided they do it right.

There are still naysayers who believe that it’s all too hard and too many conflicts of interest exist in financial planning which may damage their brand and reputation however risks can be managed.

There are a number of different ways to introduce financial services (see page 7). Some are quicker and less complex than others.

Generally, the easiest way is to introduce financial services on a referral basis which minimises expenses.

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If offering clients comprehensive strategic and investment advice seems too much too soon, accountants can start small with life insurance and lending before gradually expanding into other areas of wealth management such as holistic strategic advice and estate planning.

For example, the average suburban accounting firm in Australia charges around $200-$300 to prepare and lodge a simple tax return however they may be able to lift that fee to $400-$550 by adding insurance advice. That fee may double or triple again if they’re able to offer coaching on saving, budgeting and cashflow management.

It’s easy to see how a client paying $300 for a tax return can, over time, become a client paying over $2,000 per annum for

accounting services and strategic advice on insurance, superannuation and investments.

It is all about the money?The benefits of melding traditional accounting and financial advice go way beyond money. Although it’s often extremely financially rewarding both in terms of building a diversified revenue stream and lifting capital value, there are many non-financial benefits.

For starters, accountants can satisfy their duty of care to their clients by raising awareness about their potential need for life insurance, income protection and TPD cover. They can deliver peace of mind to clients and their loved ones by helping them protect their wealth in the unexpected event of death or illness.

They can play a more significant role in their clients’ lives and become their primary trusted adviser, in conjunction with the financial planner, by helping their clients secure a comfortable retirement and financial independence.

In an increasingly competitive environment, accountants who can provide more than tax advice and accounting services but a complete, integrated wealth management solution under one roof will effectively put a fence around their clients.

By meeting their clients’ total financial needs, they can minimise or remove the need for their clients to go elsewhere for advice, which would put them at risk of losing the client to an accounting firm linked to that adviser.

LIFE AFTER THE ACCOUNTANTS’ EXEMPTION

Accountants have historically been able to provide non-product advice and advice on the establishment of self-managed super funds without holding an Australian Financial Services Licence (AFSL) or being authorised by an AFSL, under the accountants’ exemption in the Corporations Act.

With the recent removal of the accountants’ exemption on July 1, 2016, accountants who want to continue providing advice on the establishment and winding up of SMSFs must either hold a limited or full Australian Financial Services Licence (AFSL) or become a limited or full authorised representative of an AFSL.

Alternatively, they can form a referral partnership with a licensed adviser (either internal or external) and oversee the provision of complementary financial services, ensuring they remain their client’s primary, trusted adviser.

For many accountants, the most practical solution will be to get authorised under another entity’s AFSL.

Remaining unlicensed and referring clients to another accountant or financial planner isn’t a palatable, long-term solution, especially for those who have been providing SMSF advice to their clients for some time.

DAVID LE SEURPARTNER, TATNELL-DLS

Bradley Tatnell and I recently completed the GPS Wealth RG146 compliance course.

The whole process was straight forward and time efficient which is

valuable to us as busy professionals. We would highly recommend

GPS Wealth for anyone requiring RG146 compliance.

ADAM CHALK FINANCIAL ADVISER,

BURKE CHALK & BALL ACCOUNTING AND FINANCIAL ADVISERS

GPS has a unique offer. The group’s client-centric advice philosophy is completely aligned to our way of thinking and it’s backed by a suite

of effective client engagement, practice management and advice

tools, and a team that’s fully committed to doing whatever it takes

to help accountants and advisers build and run successful businesses.

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Accountants have been stereotyped and pigeon-holed as nerdy, cardigan-wearing number-crunchers who lack personality.

They aren’t known for their soft skills but rather their technical knowledge of tax law, organisational skills, eye for detail and trustworthiness. Such qualities are valuable and essential but accountants need to add emotional intelligence (EQ) to the list to become even more attractive.

EQ allows accountants to connect with their clients on a deeper level by asking poignant questions, listening to their answers, reading their body language, proactively identifying areas in their life that need attention, and providing ongoing coaching and mentoring to help them achieve their financial goals.

EQ is the quality that will separate great accountants from average accountants, and help them defend against digital disruption.

Articulate your value proposition and review your pricingWith technology threatening to turn traditional accounting into a commodity, practitioners need to get better at articulating their value proposition, highlighting their competitive advantages and selling themselves. This isn’t a technical conversation.

While many financial planners are natural marketers, accountants are typically more conservative. However, one of the biggest advantages they have is their position as their clients’ primary, trusted adviser. That’s the ideal platform to talk about the value they can add in a broader variety of areas.

From there, they need the confidence to ask to be paid a fair and reasonable fee for their expanded services and expertise.

Traditional hourly rates may not be an optimal way to charge for work given hourly fees effectively penalise practitioners for being efficient and reward inefficiency. Many accountants who have already made the leap into financial services have found the best way to approach pricing is to experiment and be flexible.

DON’T FORGET TO ASK FOR REFERRALS

For the majority of accounting practices, organic growth is their main (and only) strategic plan yet accountants are so busy working in the business, few spend adequate time working on the business. Furthermore, they tend to be uncomfortable asking for referrals.

The exponential growth of the SMSF sector has been a boon for many accountants, leading to steady revenue growth but with the sector’s growth slowing and tougher regulation around what accountants can and can’t do, they’ll increasingly rely on referrals from existing clients for growth.

Small practices need to actively pursue business development opportunities, whether that’s attending local events, developing a new website or a targeted digital advertising campaign.

Develop EQ not only IQ and sell yourself

It’s not good enough for accountants to focus on adding value. They need to talk openly about the value they add and ask to be paid a fair and reasonable fee.

JAMES MULHEARN DIRECTOR, INITIATIVE GROUP

We feel fortunate to have found a non-institutionally owned

licensee who shares our passion and commitment for strategic

client-focused advice.

That may look like a fixed fee arrangement, percentage-based fees, hourly rates or a combination.

Ultimately, price is rarely the determining factor for people when it comes to choosing a financial professional.

The key consideration is value. If accounting practices can continuously lift and articulate the value they add, fees won’t be an issue.

To help practitioners develop their soft skills, registered training organisations (RTOs), professional bodies and most licensees offer a range of continuous professional development (CPD) courses. Many also provide client engagement tools and calculators to foster deeper conversations.

As a starting point, advisers venturing into financial services should follow a formal advice process, which begins by detailing their skills, qualifications and experience; the services they will provide; the outcomes they will deliver; points of difference; and their fees.

Accountants who belong to a well-resourced licensee will also have access to generic templates to help them articulate their value proposition in writing.

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SHANE BARTRIM PARTNER AT COLLINS HUME

We wanted an independently-owned group that we could trust not to

flog product but who was committed to helping us deliver quality advice

in the client’s best interest. That ultimately led us to GPS Wealth.

Their model was different and the way they approach advice is very

much aligned to our way of thinking.

Given the rapid pace of technological and regulatory change it’s hard to know exactly what the accounting firm of the future will look like but there’ll certainly be more one-stop-shops providing the whole gamut of accounting and financial services.

That’s not to say accountants will become qualified financial advisers too. It’ll be quite the opposite. If the fate of the early movers into financial services taught us anything it’s that accounting and financial planning are two separate, distinct areas which require different specialist skills.

It’s difficult, if not impossible, for one person to do both jobs exceptionally well. A highly-skilled accountant and a highly-skilled adviser working together is a very powerful proposition for clients and will deliver improved outcomes.

Select the right business model and licensing option

The threat of digital disruption and heightened competition means it’s never been more important for accountants to become a one-stop-shop and put a ring-fence around clients to secure their loyalty.

Accountants who value independence should look for a licensee with no ties to a product manufacturer.

They should partner with a dealer group that can help them grow and manage their ongoing legal obligations through coaching, mentoring and the provision of compliance, practice management and client engagement tools.

This is in addition to traditional dealer services like a robust advice framework, education and training, revenue collection and processing, investment and life insurance research, and a broad Approved Product List (APL).

A good licensee should ensure their representatives understand what they’re covered for and what they’re

not covered for so they don’t overstep the mark.

Many dealer groups use their scale to negotiate a standard level of Professional Indemnity cover at a competitive price.

Dealer groups with a long, clean history of delivering quality, professional advice; evidenced by a strong compliance culture, a minimal policy excess and few claims, will be able to secure optimal cover.

Accountants must have total confidence that the team behind a licensee has a proven track record of delivering improved client outcomes.

It’s not enough for a licensee to express a genuine commitment to serving the best interests of clients.

CHOOSING A LICENSEE

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Four ways to tackle the advice opportunity

1. Gain a limited or full licenceAccountants can apply to ASIC for a limited or full AFSL. ASIC will closely examine whether they have the necessary skills and experience including three years of relevant experience over the past five years.

AFSL holders must also meet ongoing compliance and regulatory obligations, which may require a full-time or part-time compliance officer. Practices will need to factor in the time and costs associated with running their own AFSL which may include hiring a compliance officer. This is on top of running their accounting practice.

2. Gain a limited or full authorityAccountants can become authorised under another entity’s AFSL. Gaining a limited authority will enable practitioners to continue providing advice on the establishment and closure of SMSFs. With a full authority, they can provide comprehensive strategic advice and product-specific advice.

After assessing the market and selecting a suitable, culturally-aligned licensee, the process of being appointed as a limited authority by a dealer group can take several months, depending on how long it takes an accountant to complete any necessary education and training. (See breakout box: Choosing a licensee)

3. Form a joint referral relationship with a licensed adviser and refer existing clients to the new entityFor those who are just starting out, this is a lower risk option. While it doesn’t require a significant investment, it is critical for accountants to choose the right referral partner to ensure clients receive quality advice and professional service, which reflects and reinforces their firm’s high standard of service and advice. Accountants who are considering this option and are authorised by a dealer group should get help from their licensee to find the right partner and ensure the right legal arrangements are in place. Many licensees have standard contracts and agreements which they can use as a starting point.

4. Employ a qualified professional adviser in-house This option is more common among accounting practices which are large enough to justify the cost of bringing the capability in-house. Accountants who are considering this option and are authorised by an existing AFSL or dealer group should get help from their licensee to recruit a suitably-experienced, commercial candidate that will be a good cultural fit.

IOLANDA ROMANO PRINCIPAL OF ROMANO

BUSINESS ACCOUNTANTSI’d looked at several other dealer

groups but they were either focused on large accounting firms or represented low value for money. I was incredibly impressed by GPS Wealth’s culture

and level of professionalism.

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How can we help you?GPS Wealth is a specialist Australia-wide financial services dealer group. GPS Wealth provides best practice tools and resources to accountants, financial advisers and referral partners. It seeks to partner with forward thinking financial planners and accountants.

Award-winning advice GPS Wealth has consistently been recognised as Australia’s leading advice group by independent research house, CoreData. Other industry accolades include being named the 2016 Dealer Group of the Year in the IFA Excellence Awards.

For more information, please visit www.gpswealth.com.au

GETTING AUTHORISED

GPS Wealth has distilled the authorisation process into six simple steps.

STEP 1: Complete a two-day RG 146 course covering generic knowledge, superannuation and SMSFs, and pass the assignment.

STEP 2: Apply to the licensee to become a limited authority.

STEP 3: Undergo their required background and reference checks including a police and bankruptcy check.

STEP 4: Complete ASIC’s registration process.

STEP 5: Complete the licensee’s onboarding process which will include a one-day induction course and training.

STEP 6: Become officially appointed by the licensee as a limited authority.

Greg HolmanDirector and co-founder

D: (07) 5408 4100M: 0412 538 723E: gholman@gpswealth.com.au

GPS Wealth LtdAFSL 254 544Australian Credit Licence 254 544ABN 17 005 482 726