The problem with accountant licensing in Australia
Licensing of Australian accountants has long been a prickly topic. What’s likely to change?
It’s no secret in Australian accounting that the licensing system, for accountants who would like to give advice in relation to a financial product, has problems. It is complicated, expensive and historically has not been policed. And as licensing only affects those in practice, the issue has also had relatively little support from the profession’s three main peak bodies in Australia.
Kath Bowler, CEO of Licensing for Accountants, an independent firm that supports and transitions accountants into licensing, explained the real issue is not actually all about licensing.
“Licensing, in fact, is simply the straw that broke the camel’s back,” said Kath. “It’s just one of the many issues that accountants have to deal with when expanding from compliance to advice.
“Every accountant who gives advice in relation to a financial product must be licensed, and superannuation is a financial product. Super and self-managed super funds are part and parcel of advising business owners, because they’re one of the main forms of tax deductions that are left. That’s why the licensing issue has major effects on those who advise business owners.”
How does licensing work?
A few years ago, accountants had a multitude of options available in terms of how they might become licensed. They could apply to ASIC for a license. They could also go to many other organisations and become authorised under their license.
Every accountant who gives advice in relation to a financial product must be licensed, and superannuation is a financial product.
Today the landscape is quite different. Choices are becoming increasingly limited for accountants to move into the advising space. This is because some of the institutions offering authorisations had a different objective in licensing accountants - they were trying to turn them into financial planners.
Also, in order to get into the advising game, accountants previously required a specific amount of training, as outlined in ASIC’s RG-146 guide. But Kath noted that the rules around that training are set to change significantly as of 1 January 2019.
Issues on the horizon for 2019
“If accountants thought it was difficult before, it's about to get a whole lot harder,” she said.
“Up until now, RG-146 outlined the required training in the areas that you wanted to give advice. It broke it down into a dozen different specialist areas. If you wanted to advise on superannuation, you only needed to do an RG-146 course in super. If you wanted to advise on shares, you only needed to do an RG-146 course in security.
“But from 1 January next year, and this is yet to be finalised, it will likely require a full degree, or equivalent, in the financial planning space.”
The problem with this, suggested Kath, is that there is no distinction between a financial planner spending their entire career in the space and an accountant who needs to be licensed only in the area of superannuation.
Rising costs facing CAs and accountants
Finally, there’s the issue of cost - both initial and ongoing. If we look at the initial training alone, it used to be the case that the RG-146 course in a specific area might cost $2,000 to $3,000. Now it’s $5,000 to $15,000 to be licensed to give advice on financial products.
“As a result, there are quite a few accountants out there who are unlicensed but who are still advising,” she said. “ASIC, to date, has not taken any action.”
Accountants are now on the back foot in terms of owning that advisory space.
All indications are that ASIC will step up its regulation in the licensing space during 2018. But the overhaul of the system that will make it easier for accountants to be licensed to offer financial advice does not seem to be on the radar.
“Education is changing, with double degrees in accounting and planning etc,” she said. “The financial planning industry has forced that change at university level. But the majority of practices are owned by men over the age of 50.
“I remember four years ago doing a presentation on the fact that it was a perfect storm for accountants to own the advisory space, because everything was in their favour. That is no longer the case.
“Accountants are now on the back foot in terms of owning that advisory space. I believe there’s a long, hard road of change ahead for accountants in practice.”
About the author
Chris Sheedy is one of Australia’s busiest and most successful freelance writers. He has been published regularly in the Sydney Morning Herald, Virgin Australia Voyeur, The Australian Magazine, GQ, In The Black, Cadillac, Management Today, Men’s Fitness and countless other big-brand publications. He is frequently commissioned to carry out copywriting and corporate writing projects for organisations, including banks, universities, television networks, restaurant chains and major charities, through his business The Hard Word.