Moving towards a multidisciplinary advisory practice

Smart practice

Wednesday 08 March 2017

Financial advisory practices have long debated which business model will be the most competitive in the post-regulatory world: accounting, financial planning or a hybrid of the two.

Now that the final pillar of regulation is in place (accountants are now subject to the same licensing requirements as financial planners with respect to advice on self-managed super funds (SMSFs)), the debate is heating up.

In addition, the combination of technological innovation and increasing competition is driving up consumer demand for financial services. According to the latest Investment Trends data, the number of Australians seeking financial advice is finally on the rise, after years of staying static.

Rob Hayward, Head of Client Solutions, Macquarie Wealth Management, says the incentive for advisory practices to offer combined services is greater than ever.

“High performing financial advisory firms are winning a greater share of wallet by focusing on understanding and subsequently meeting client needs. What they are learning is that Australians have begun to understand the merits of a one-stop financial advice shop,” he explains.

“The advantage for consumers is that they receive a broader set of services under one roof. They also don’t have to worry about what ‘type’ of advice they need because the firm will provide what’s right for them according to their needs. It removes the guesswork for people who don’t know where accounting stops and financial planning starts.

“The benefit to the firm is that a multidisciplinary advice experience increases the likelihood of meeting a wider range of needs for each client, deepening the relationship and increasing the share of wallet. This, in turn, assists in increasing client retention,” he says.

According to the latest Macquarie Accounting and Financial Services Benchmarking Report, multidisciplinary advice models offer clear financial advantages: over 50% of multidisciplinary firms, with both accounting and financial planning in-house, enjoy a profit of over $750,000, compared to 30% of firms overall.

“Multidisciplinary advice firms offer more services so logically their revenue per client can be higher, but this can also translate to the bottom line as there are efficiencies in offering more services to individual clients and having a lower total cost to serve,” Hayward says.


Types of multidisciplinary advice models

Financial planning and accounting practices have a number of different options available when it comes to providing multidisciplinary services to their clients.  

“What we are seeing is that there is no one silver bullet. Your chosen model of convergence needs to align with your business strategy, the needs of your ideal target clients and the growth aspirations of your practice.

Four of the main emerging models that enable practices to offer a converged client experience are outlined below.

  1. The licensed accounting firm model

    In this model, an accounting firm can continue to provide traditional services by obtaining a full or limited Australian Financial Services Licence (AFSL) or authorisation, thereby complying with new regulations. This allows the accounting practice to continue providing advice to clients about their SMSF, in line with the scope of the limited licence.

    “Accounting firms who want to obtain a limited or full licence/authorisation for all or a selected number of accountants can do so to allow the business to continue providing advice to clients,” says Hayward.

    Of course, accounting practices may choose to continue operating as they always have (ie without an AFSL), but it carries a certain amount of risk. Employees will need to be trained in respect of what they can and can’t do under the new licensing laws and accountants may no longer be able to provide clients with the full breadth of SMSF advice they need.

Your chosen model of convergence needs to align with your business strategy, the needs of your ideal target client, and the growth aspirations of your practice.
  1. The referral model

    This model relies on an accounting or financial planning firm building a formal referral partnership with another firm of the alternate discipline.

    “By building formal referral partnerships, you can ensure the needs of your clients are met with a trusted provider with similar values and a similar target audience. There is also the potential to generate cross-referrals from the aligned partner,” Hayward says.

    “The advantage for an accounting firm is that this model removes the need to obtain a limited AFSL or authorisation, eliminating the added administrative burden associated with licensing, while still ensuring your clients can access the advice they need.”

  2. The specialist referral model

    In this model, an accounting firm acquires a limited licence/authorisation to enable it to continue addressing the immediate needs of its clients, but uses a referral partnership with a financial adviser for clients who require more specialised financial planning services. In this model, the client relationship typically remains with the accounting firm.

    “This model delivers value to the client by solving their challenge on the day, but also creates a more compelling long-term proposition, enabling practices to drive growth from existing clients,” Hayward says.

  3. The converged financial planning and accounting experience model

    Businesses seeking to deliver a fully converged client experience can do so in a number of ways: expand their offer to include both financial advice and accounting services or acquire, merge or enter into a joint venture with another firm.

    “Full convergence naturally offers a more integrated client experience, as the advice received is not restricted by the limited licence. It also reduces the administrative burden that limited licensing places on accountants and makes it easier to introduce the idea of a broader financial advice relationship with the client,” Hayward says


Overcoming challenges

While a converged accounting and financial planning business model makes sense on paper, the practicalities of it remain a challenge for many.

Hayward says business owners should be wary of jumping into a new business model too hastily.

“What many business leaders don’t realise is that shifting to a converged model requires significant cultural and operational change.

There is a need to ensure both accountants and financial planners have a strong understanding of each other’s offer and how working together will come to life across the client experience

This includes understanding where each individual’s capability ends. The worst thing that can happen is the client is shuffled back and forth between the accountant and the planner.”

Still, despite the challenges, a converged model is not out of reach – and it shouldn’t be dismissed as an option. To continue driving growth, both professions will need to look at ways they can add value for clients by focussing on understanding and meeting client needs, building trust and over time, increasing revenue per client.

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Unless stated otherwise, this information has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502 and does not take into account your client’s objectives, financial situation or needs. 

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