Advice and accounting business brokers Greg Quinn, Tim Lane and Paul Tynan

There has been a shift in the mergers and acquisitions landscape according to advice and accounting business brokers, with struggling accountants now rushing to merge into scale or sell up entirely while advisers who might have otherwise left the industry take advantage of the extended timeline for FASEA examination requirements.

The dynamic is a reversal from early 2020, when advice business owners were lining up to leave the industry due to a confluence of pressures stemming from the Hayne royal commission and FASEA’s education mandate.

“I’ve been doing 70 per cent on broking accounting businesses in the last six months, they’re in much more trouble than advisers,” says Paul Tynan, chief executive at Melbourne brokerage CFSB. “A year ago it was 60 per cent financial planning and 40 per cent accounting.”

Struggling to adjust

The pandemic has placed increased pressure on accountants to keep up with and model a raft of changes implemented by the Morrison government and the Australian Tax Office, brokers report, including support measures like Jobseeker and Jobkeeper, as well as updated expense reporting rules catering to people working-from-home.

While mid-sized and larger accounting practices have flourished, some smaller outfits have found it hard to adjust their models and remain profitable.

“A lot of smaller accountants are saying that it’s just too bloody hard,” says Tim Lane from Sydney brokers Centurion Market Makers. “Running a day to day accounting business and compliance shop is juts getting more complex all the time, and Covid-19 has been a tipping point.”

“When the virus hit, all the support packages like Jobkeeper and Jobseeker made things very difficult,” Tynan adds. “These accountants feel like they’re an arm of the ATO and a lot of them don’t know how to charge for all this extra work.”

Accounting firms with scale and the resources to specialise are getting through it, says Chase Corporate Advisory’s Greg Quinn. For the rest it’s tough going. “If you’re a one or two-man band accounting practice you’re really struggling, you haven’t got the time in the day to get across everything,” he says.

Stalled adviser exodus 

In contrast with accountants, the flow of advisers looking to leave the industry has slowed. According to research house Adviser Ratings the total adviser numbers only contracted 1.8 per cent in Q3 2020, “comfortably” the lowest quarterly decline since the industry contraction started in 2018.

The brokers believe a significant driver for this slowdown is the extension handed advisers to complete FASEA’s education mandate. The adviser exam extension, in particular, from the end of 2020 to the end of 2021, has spurred many who were preparing to leave the industry to delay their exit another year.

“There hasn’t been as many advice exits as expected,” Quinn says. “The FASEA thing pushed out some of that.”

Tynan says a lot of older advisers who were intending to use the education cut-off dates as their marker to leave the industry will likely look to sell mid to-late next year instead.