How to reduce the impact of regulatory burden
Changes to the accountants’ regulatory regime would help consumers and business, a new regulatory burden report reveals.
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 survey for CPA Australia.
More than 600 CPA Australia members in public practice participated in a survey for the report, and more than 1000 consumers and SMEs responded to a related survey designed to understand their experiences when seeking advice and services from accountants.
In addition, focus groups of 60 CPA Australia members as well as consumers and SMEs provided further detail.
How to reduce regulatory burden
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 have not been able to 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.
“Just over 60 per cent did not seek specialist advice, yet this kind of advice is crucial, especially in an SME’s first three years,” Waller says.
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.
Figure 8: Generally speaking, which of the following relationship structures would you prefer in meeting your personal advice needs? Select the image to enlarge it.
n = 1011
Source: CPA Australia survey of consumers and SMEs August 2019
The report estimates the costs of providing services with an Australian Financial Services Licence to be about A$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 services, 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.
Figure 4: What other services would you like your accountants to provide you? Select the image to enlarge it.
n = 747, respondents who want to receive other services from their accountant
*Multiple responses only
*Top 5 responses only
Source: CPA Australia's survey of consumers and SMEs August 2019
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 to offer some of their current 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 recommendations in the report could help reduce the regulatory burden by removing inefficiencies, while providing real and effective consumer protections and encouraging people to seek advice when they need it.
Download CPA Australia’s Regulatory Burden Report.