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Towards A New Profession – Adviser!

By January 25, 2017March 15th, 2019Advice, Uncategorized

The advice professions are on the cusp of a revolution, or if not a revolution an evolution that is going to be so rapid as to make their businesses unrecognisable in five years.

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The trouble is that the regulator and indeed more than half of the profession does not seem to understand that this revolution is coming and as a consequence they are not keeping pace

The change that is occurring is a fundamental shift in the nature of advice itself. In the past, a financial advice business was firmly rooted in the distribution of insurance policies and investments. In the past, the accounting profession was known best for preparation of income tax returns and other “compliance” activity. In the future, a new kind of adviser will take a more holistic road which may at times be completely removed from product or compliance at all.

The professions of course are engaged in a turf war, trying to protect the corner of the universe over which they have for so long held sway rather than trying to up skill themselves in other disciplines for the benefit of the client.

The reaction of the regulator has been to do what regulators do best, that is regulate. In the main, they have attempted to prevent accountants from providing financial advice (see some of the latest restrictions in relation to limited licensing) from preventing financial advisers from providing taxation advice (see the recent developments in the area of TASA) and for a long time there have been restrictions on either profession providing anything that looks even a little bit like legal advice.

Most licensees are also not immune from this kind of opinion. Many restrict their advisers from providing any advice in respect of direct property for example. There is no regulatory restriction on providing property advice, in fact there is no licensing regime in this area at all, and yet most of the people who are seeking this kind of advice have no real source of that advice unless they seek it from somebody who is completely unlicensed.

The adviser of the future has skills knowledge and expertise across a wide range of disciplines, and is able to “advise” his or her clients in just about any area where they might seek advice. This could range from managing household cashflow to business structuring for taxation purposes to constructing an effective estate plan, and anything in between. They might advise on managing the mortgage, or funding children’s education or protecting the family in the event of unforeseen events. They could also assist in preparing a home for sale or purchasing an investment property. If the required skills are not held directly by themselves they know who to consult to obtain the appropriate advice, but it is they, the adviser, who passes the information on to their client because it is they who have assessed the advice obtained externally and ensured it is relevant to their client.

Of course this is not really all new. The very best accountants and financial advisers (and to a lesser extent lawyers) have been doing this for generations. Much of what has been described here used to be seen as the role of the client’s accountant, but at some point, much of that profession gave up this ground for the cash cow that was preparing income tax returns. Many financial advisers shied away from encroaching on the “turf” of the accountants who referred new clients to them and therefore declined to advise on tax planning or debt management. The most important person in all of this, the client, has been left with seeking advice from a wide range of sources, sometimes not in a co-ordinated way, and at times in conflict.

An accountant who recommends a superannuation contribution for purely taxation reasons without considering the retirement plans of the client, or a financial adviser who recommends a transaction without considering the tax consequences, or a lawyer who constructs an estate plan without reference to the superannuation balances of the client is clearly not doing their job properly. It is not sufficient to attempt to disclaim responsibility by inferring that these aspects are the domain of one of the client’s other advisers. In the end the client just wants advice, taking into account all matters and tailored to their circumstances. Similarly it is not right for one professional to cry foul because another adviser encroached on what they perceive to be their turf if they had not been providing this “whole of life” advice.

It is my belief that more and more clients are seeking this kind of advice, and will vote with their feet as the saying goes. If you or I are not prepared for the revolution, we had best be prepared to watch it pass us by.

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