Limited licence advisers pushed out by standards

Accountants providing advice under a limited licence are deserting the industry in droves, with huge losses in personnel largely attributed to the difficulties specialists have in meeting the standards set by FASEA.

The nation’s two main groups that provide limited licenses, Easton Investments and the National Tax Accountants Association, lost 30.3 per cent and 14.9 per cent of their adviser force respectively in the last year according to the latest Professional Planner Licensee List, which is a stark reversal of fortune.

Both groups ascended the annual licensee list rapidly over the past few years. The NTAA’s sole licensee, the SMSF Adviser’s Network, went from only 33 advisers in 2016 to 1021 in 2019 as accountants latched onto the opportunity to provide advice around SMSFs. This year that number dropped to 869.

The trend repeats for Easton’s main brands, with GPS Wealth rising from 164 advisers in 2016 to 343 in 2019 before falling to 249 this year, while Merit Wealth’s 2016 team of 95 advisers rose to 439 in 2019, before reducing to 347 this year.

“There’s no doubt that FASEA has been a big factor,” says Geoff Boxer, chief executive of the NTAA.

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Boxer says that pushing accountants who provide SMSF advice to undertake the same mandatory education standards as full financial planners is an “awkward” dynamic and one that is pushing them away from the limited license provision.

“The guys have got to do these exams on things they’re never going to give advice about,” Boxer says. “To be forced to study those units to the same extent as a full financial planner puts them in a position where it’s not attractive.”

He estimates that advisers in the SMSF Adviser Network only use the limited license function for “five per cent of their business lives”, which makes the education mandate hard to justify.

“What they do within our licence is a small part of what they do in the wider business,” Boxer estimates. “When they need to give advice they wade in and wade out, it’s not a license they use all day every day as opposed to a full planner.”

GPS Wealth chief executive, Grahame Evans, says that while the reduction in numbers is due to a combination of things, the education mandate is “certainly one of them”.

“It’s an extra obligation for advisers and they’re thinking: ‘How much am I doing in this area? Do I want to put the time and effort into the CPD, the exam and education?”

Both Boxer and Evans agree that the ill-fitting education mandate isn’t the only factor pushing advisers away from the limited license provision. Boxer notes that ASIC’s user pay levy was raised 26 per cent this year and does not distinguish between limited and fully licensed advisers, while Evans identifies difficulties in providing SMSF advice without overstepping into other areas of advice.

Both are factors (as is the COVID-19 pandemic and a host of other issues), but the education authority’s suite of requirements is possibly the greatest impost for specialist or ‘niche’ advisers.

Another example of this are insurance advisers, who are on par with accountants in required to be licensed as financial advisers to operate in a specialist field.

“The FASEA exams don’t differentiate between a financial planner and an insurance adviser,” says Don Trapnell, founder and director at licensee owner Synchron. “That’s causing insurance advisers to leave the industry.”

Synchron is one of only two entities in the top ten providers that actually gained ground in 2020, adding 38 representatives. Trapnell reports, however, that the education mandate has taken a toll.

“Even though we had a 7 per cent increase we still lost a lot,” Trapnell says. “The ones that are leaving tend to be older, very experienced risk specialists.”

According to Julie Berry, who currently sits as the director of the government’s Tax Practitioner Board, the decline in numbers for specialists due to ill-fitting education requirements is no surprise.

“It was always expected that there would be business decisions made off the back of this,” Berry says. “The TPB has education requirements, then FASEA has education requirements.”

There is a considerable crossover in CPD requirements and ethics guidelines for both the tax and financial advice spheres, Berry notes, which allows for some efficiencies. “Even though some of it can be used across both it’s a lot to cover,” she adds.

Whether the education requirements will kill off limited license advice provision remains to be seen, but Boxer thinks that may be too early to call.

“I don’t think it’ll be the end of the limited licensee, that would only happen with the accountant’s exemption being reinstated,” he says. “Accountants still want to be in the room to give that strategic advice.”