Lesley Meall 18 Jul 2019 10:11am

Paint a bigger picture

What do you do when clients seek financial advice? Building relationships with personal financial planning and investment experts, and offering a ‘whole life’ service, can benefit accountants professionally and personally, discovers Lesley Meall

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Caption: Illustration by Alice Mollon

Life can change in an instant. Just a few weeks ago, Peter Pickle was celebrating three major contract wins by Widget, his engineering business; promising to help his daughter get onto the property ladder; and talking to his wife about when they could afford to buy their dream holiday home in Portugal. Then his father unexpectedly died. Now Pete’s financial plans for his family seem a little less rosy and a lot more urgent.

He’s desperate to stop his mum from worrying about inheritance tax and probate; he wants to make plans for his early retirement and estate planning; and he needs to do it fast. Initially, Pete expected his accountants to help. After all, they’d done a brilliant job of guiding Widget financially for over 20 years. But their meeting to discuss his personal financial planning woes was disappointing: after telling Pete how many things the firm couldn’t help with, his accountant handed him the business cards of some financial advisers and then sent him a bill for £150.

Scenario planning

This scenario may resonate with accountants for various reasons. Some may have grappled with similar personal issues to Pete; some may identify with the stance taken by his business-focused accountancy firm; some may be congratulating themselves because their firm offers the sort of integrated ‘whole life’ advisory service that Pete has since switched to. “Every accountant has a Peter Pickle,” says John Gaskell, head of personal financial planning, ICAEW. The sort of client who trusts their accountant to help build and manage their business sensibly and prudently, often over decades; and also turns to them for guidance when they and their family need a trusted source of personal financial planning and investment advice.

Clients like Pete may need help with matters such as accessing or consolidating their pension pot, structuring and managing investments, tax and estate planning, helping family members with a house purchase, long-term care, wills and probate. “Personal financial planning has been identified by ICAEW’s Tomorrow’s Practice project as a key growth area for chartered accountants,” says Gaskell.

Opportunity knocks

Practitioners can broaden their offering, improve client outcomes and enhance the firm’s proposition, by taking a more holistic ‘whole life’ view of clients that can help them to achieve both business and personal financial goals. Gaskell says the key to this is “greater collaboration”, with clients and other professionals who can “pick up the baton”

When accountants have gone as far as they can. Accountants can unlock this opportunity by building on the trusted relationships they have established with clients and developing new trusted relationships with advisers from different disciplines. “Account - ants need to embed themselves deeply into the client family relationship,” says Gaskell, “and create a collaborative circle of personal financial planning professionals.” Making informed decisions about who to trust can be challenging. The rules that prescribe (and the licenses that indicate) who can provide different types of regulated personal financial advice are intricate, making personal financial planning and investment advice a tricky area for individual accountancy professionals and firms to navigate and manage client expectations.

Embracing change

Accountants must know what they can offer advice on if they hold a Practice Certificate, ICAEW Designated Professional Body (DPB) licence or operate under Financial Conduct Authority (FCA) regulation; how the FCA regulates advisers; what skills and knowledge are needed to facilitate delivery of a more holistic client offering; and have appropriate professional indemnity insurance. To assist, ICAEW’s Personal Financial Planning Community has deconstructed these complex issues into practical resources.

They explain what personal financial planning accountants can and cannot offer with and without regulated advisers, and offer tips on how to select and work with them to enhance both the firm’s business proposition and client outcomes. The regulation deconstructed guide helps members better understand the regulatory and technical issues of personal financial planning. It outlines, for example, how FCA accredited bodies, firms and advisers are regulated and supervised, and how standards of professionalism are maintained. It also explains the role of DPB bodies, including ICAEW.

Red, amber, green

The traffic light guide offers clarity around what personal financial planning accountants can discuss and do with clients that is unregulated; what is regulated but can be done with an ICAEW DPB (Investment Business) licence; and what is regulated and requires FCA authorisation. It covers corporate finance, estate planning, insurance and pensions. Pensions are a vast and complex area, but focusing on just a few examples highlights what a minefield this and other areas of financial planning and investment advice can be.

Accountants need to be crystal clear and precise about what they can and cannot offer advice on – or even talk to their clients about. Factual discussions on general information on different types of pension schemes are unregulated, for example. Explaining and evaluating advice from an appropriately authorised firm for suitability of specific products is regulated but can be done with a DPB licence. Discussion with a client on merits and suitability of a specific pension contract is regulated and requires FCA authorisation.

In estate planning on pensions, providing a client with the name and contact details of an appropriately authorised firm (but not passing client’s details to the firm) is unregulated; passing on the details of a client, on their instruction, is regulated but can be done with a DPB licence; pension-related discussions and recommendations are regulated and require FCA authorisation. In the area of auto-enrolment, for example, recommending a specific pension scheme to a client business (employer) and carrying out the transaction is not regulated; general discussions with employees on different types of pension product are not regulated; discussions with an employee on merits and suitability of a specific pension contract are regulated and require FCA authorisation.

More practical tips on how chartered accountants can expand their offering in the space of personal financial planning are offered in Unlocking opportunity. It outlines how they can become licensed by ICAEW to undertake probate work, for example, and how they can use a DPB licence to work more closely with financial advisers who have permissions from the FCA to deliver advice.

Leaping hurdles

Understanding the technical, regulatory and practical aspects of expanding into personal financial planning is no small undertaking. Even so, the biggest challenges many accountants may face in making the transition from a business-only focus to a more integrated advice proposition may have more to do with changing how they interact with clients. “You need to get into a frame of mind that enables you to ask a different set of questions,” says Eric Clapton, chartered accountant, financial adviser and investment manager at Clapton Consultants.

Talk to clients about their lifestyles and lifetime plans. Gaskell agrees: “Many accountants are already virtual finance directors for their clients’ businesses. With a mindset shift, they can become the virtual finance director for the family and its personal finances.” With the right skills, mentality and circle of personal financial planning collaborators, all accountants could have helped Peter Pickle with his business and personal financial goals.