How to reduce the impact of regulatory burden

This article was current at the time of publication.

The regulatory regime for accountants must be streamlined to improve access to advice and reduce costs, a report on the regulatory framework has found.

The Regulatory Burden Report found that consumers and small business owners trust their accountant and are frustrated when they cannot get the advice they need because the accountant does not have a specific licence. Business owners, in particular, want to use their accountant as a “one-stop shop”.

Regulatory burden is limiting access to advice, raising the cost and discouraging practitioners from providing the services their clients want, finds the CPA Australia survey finds.

More than 600 CPA Australia members in public practice participated in a survey for the report, and more than 1,000 consumers and SMEs responded to a related survey about their experiences when seeking advice and services from accountants.

In addition, focus groups of 60 CPA Australia members, consumers and SMEs provided further detail.

The report calls for:

A review of key terms

To address confusion around terms such as general advice, financial product advice and personal advice.

Redefining product advice and introducing a strategic financial planning advice category

Redefining product advice could allow professional accountants to give advice without selling a product. A strategic financial planning advice designation would allow an accountant to advise their client about overall financial strategy, but not to recommend a specific financial product. 

CPA Australia Head of Public Practice Keddie Waller says almost 10 per cent of consumers and 28.6 per cent of SMEs could not get the advice they needed because their accountant did not hold a particular licence or registration. Among that group, two in 10 consumers and six in 10 SMEs did not go on to get advice from other specialist providers, often because they did not want to share personal and financial information with multiple providers.

Individual licensing or registration of financial advisers

Direct licensing, rather than the authorised representative system, would lead to greater individual responsibility and accountability, say its proponents. They say it would also reduce or remove conflicts of interest between consumers and licensees that may arise under the current system.

Align code of ethics and CPD requirements

CPA Australia members reported overlap between CPD requirements of different organisations.

Consider changes to the tax registration system

67 per cent of CPAs surveyed said the tax registration system should be changed to allow multiple registrations for those who offer financial planning advice and tax services.

The report estimates the costs of providing services with an Australian Financial Services Licence to be about $112,414, including fees to regulators, professional indemnity insurance, software and resources.

This is for a holistic public practice advisory service and while the report notes that not every accountant provides this level of service, it says “such a heavy cost burden creates a barrier for those who want to expand the range of their services”.

“While demands for financial planning advice remain strong, and are likely to grow, the number of financial advisers available to meet demand is declining, as increasing numbers head for the exit door following the significant proposed reforms,” notes the report.

Advisers leaving the industry are not being replaced at the same rate by new entrants, it adds.

Public practice benchmarks

The report found the average practice employs 1.8 dedicated compliance staff on the full-time equivalent basis and 65 per cent spend more on compliance now than they did five years ago.
Waller says one in three public practitioners are considering ceasing some of their services due to compliance obligations. 

“For one in four practitioners, about 20 per cent of their revenue is spent on meeting compliance costs,” she says. She says the report’s recommendations could help reduce the regulatory burden by removing inefficiencies, while providing consumer protections and encouraging people to seek advice when they need it.