Advice firms looking to grow might feel stuck at the moment, thanks to the quarrelsome grandfathering issue that has risen out of FoFA.
However, John Birt from M&A consultancy Radar Results says that there are other options for practices desperately looking to grow.
“[A] benefit of buying accounting practices is that their financial planning fees are mainly fee-for-service, which are unaffected by FOFA's contentious issue of grandfathering commission from investments," Birt said, as he called for an end to the bickering between the two professions.
Birt says that demand for accounting practices from planning firms is a big trend at the moment. One client even phoned yesterday looking for accounting firms in Newcastle.
“We’ve had about five or six accounting practices for sale, which are also offering financial planning services as well...Because they’re accountants they are offering financial planning services on a fee for service basis and have been since day one. Generally speaking, if you buy an accounting practice it’s more likely to be fee for service across the board.”
Although there aren’t any official numbers, Birt estimates that about half of the accounting firms in Australia offer some sort of financial planning.
Radar Results recently discussed grandfathering matters with Treasury, who said that the issue of moving revenue between different licensees will be cleared up soon.
Treasury told Birt that no financial planners will be disadvantaged and that they will be protected under certain sections of the Corporations Act.
The mentioned section – Section 1528(3) of the Corporations Act – states that the ban “does not apply to a benefit given to a financial services licensee, or a representative of a financial services licensee, to the extent that the operation of that Division [the ban] would result in an acquisition of property…from a person otherwise than on just terms”.
Birt said, “I've checked this out with lawyers and have received comments which appear to indicate somewhat differently. I believe that the Treasury will provide guidance and clarity on this matter within a month, once the new Financial Services Minister has been appointed. Simply, this legislation is anti-competitive.”
PI increases unjustified
Australia: The best place to set up a planning practice?