In an Australian first, CPA Australia has modelled the macro-economic impact of increasing the accessibility of professional advice. ‘Professional advice’ includes accounting, taxation, financial, superannuation, business, and mortgage broking advice, among others.
CPA Australia’s The Value of Advice report found that if properly implemented professional advice was available to all Australians, the total economic uplift could be $630.3 billion a year, while spending on the Age Pension could be reduced by 21.6 per cent.
Even a modest increase in the availability of professional advice could deliver significant gains. If an additional ten per cent of the population received properly implemented professional advice, the potential economic contribution could be approximately $112.8 billion per year.
The research also quantified the financial benefits for individuals of receiving professional advice. CPA Australia found that properly implemented professional advice could add 30.6 per cent ($24,716 on average) to a person’s annual income.
These figures are based on macroeconomic modelling conducted by independent research house, CoreData, which measured income risk now and in a scenario where professional advice is properly implemented. The gap is expressed as a dollar value to demonstrate the value of professional advice.
As part of the research, CPA Australia surveyed 1,244 consumers and 815 small and medium-sized enterprises (SMEs) about the intangible benefits of receiving professional advice.
Respondents reported benefits to their physical and mental health, family and social life, relationships and work satisfaction from receiving professional advice. The survey also revealed that those who do not seek advice are more likely to experience negative impacts in other areas of their life.
Given that the potential benefits are so clear, what’s stopping consumers and SMEs from accessing professional advice?
The research identified a range of reasons, but structural obstacles represent a significant challenge. The provision of professional advisory services is governed by a complex and ever-changing regulatory framework. This is deterring clients from accessing advice and resulting in an increasing compliance burden for professional advisers.
To realise the potential benefits CPA Australia identified it this research, we need to increase the accessibility of professional advice. This requires a system which recognises and caters for how consumers and SMEs seek out and use advice – that is, a client-centric model.
This is currently a common theme among calls for reform, but what would a client-centric model of professional advice look like? CPA Australia’s research quantifies what clients’ financial challenges and goals are and how they define financial advice.
The research found that consumers and SMEs see financial advice very differently to lawmakers. For them, it’s heavily anchored to their goals. Budgeting and saving, making better investment decisions, retirement planning and paying off debts are regarded by clients as functional tasks which one qualified professional should be able to help them with.
In reality, however, these advice needs are governed by different legislation and regulations. Routine services, such as those listed above, may require multiple different advisers, notwithstanding that many accountants have the requisite skills to provide them.
CPA Australia is committed to advocating for changes to deliver a more accessible and affordable advice framework. We have identified a range of reforms that can help build a consumer-centric advice model. The key changes we will be advocating for are:
- Reflects client goals, not product: Key terms must be redefined to reflect consumer and SME goals and needs, as well as be meaningful to the community, not just the financial services sector. This must include separating the strategic advice from product.
- One regulatory regime, one regulator: The research shows that consumers and SMEs want to be able to access advice to meet their goals from their choice of professional adviser, regardless of the type of advice. A single regulatory regime should be established for the regulation of professional advice, monitored and enforced by one regulator.
- Single Code of Conduct: A principles-based statutory code of conduct that clearly sets out a consistent and uniform framework of expected ethical responsibilities and behaviour should be implemented for the single regime. The single regulator must be responsible for monitoring and enforcement of the code of conduct, as well as administering any disciplinary action as a result of non-compliance.
- Individual registration of advisers: Individual registration of professional advisers would lead to greater responsibility and accountability, requiring a personal commitment to integrity, competence and ethics. This would foster and strengthen the relationship between client and adviser and reduce or remove conflicts of interest between consumers, advisers and licensees that may arise in the current regulatory environment.
It's clear that the current model of professional advice is deterring consumers from seeking professional advice, and this is costing them and the economy dearly. As we seek to help consumers, businesses and the economy recover from the financial impact of COVID-19, the time is ripe for meaningful reform to ensure all Australians have the opportunity to access professional advice.
View the full The Value of Advice report for further insights.