SMSF practices will grow, change and adapt. But how? 

Future SMSF Practices

How the industry responds to current issues as well as the regulatory framework will shape what future SMSF practices will look like in 10, 20, 30 years.

Aaron Dunn of Smarter SMSF in Melbourne is an active voice in the industry and so we asked him where he sees us heading. Here is what we learned.

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Issues

Legislative change is creating huge challenges at an individual as well as practice level. It is making it difficult to stay competitive and offer value to clients.

Specialised practices are generally outperforming within SMSF sector, but have similar challenges given the breadth of super and regulatory reforms, along with the pace of technology advancements.

The inconsistency in approach creates challenges – from leveraging cloud technology, through to alignment in processes and documentation.

The focus remains on efficiency (inward), rather than the client (outward)

There is a genuine perception that many practices are not ready for the ongoing TBAR requirements post 1 July 2018 .

Survey 2018 Insights

Smarter SMSF ran a survey of 488 SMSF practices in 2018 about the challenges they face.

Of these 488 participants 32% are providing SMSF specialist services. 88% provide SMSF services directly to a trustee. 36% are unlicensed accountants working with SMSFs and 11% refer to themselves as niche SMSF businesses.

Questions

What worked really well over the past 18 months within your SMSF business as a result of the super reforms?

What did you believe hasn’t worked or you’ve fallen short of what you wanted to achieve as a result of the super reforms?

Knowing what you know, what do you believe needs to be done differently as a result of the super reforms?

What will it mean for you and the business if you can put this in place?

Challenges

Survey participants saw the greatest challenge in:

Keeping up to date with legislative change
Meeting the additional licensing & education requirements
Competitive pricing & fee recovery
Technology & business efficiencies 

Current Situation

The ‘migration to cloud’ conversation has effectively gone. Migration to the cloud is a given. ‘Cloud’ is the norm, not the exception.

90% of practices are using some cloud technology (22% entirely cloud-based). Practices using SMSF cloud software have done so for an average 2.51 years (median 2 years).

Whilst a majority of practices (representing total SMSFs) have now transitioned to cloud, it is the rate of change by practices that drives how wide the gap is and will become.

The approach to work flows for example hasn’t changed that much even with the adoption of cloud technology. About 45% are now processing fund data regularly (>400 funds – 64.29%). 31.25% provide client’s with up-to-date online access to their fund information.

39.3% of participants only provide an annual service offering. Most practitioners only respond to regulatory change (because they have to), not because it improves their business and client experience.

Future Outlook

Participants remain buoyant about the opportunities within the SMSF sector, in particular strategic advice, estate planning, admin and compliance. 

39% are looking to increase exposure to the SMSF sector. 17% will focus solely on SMSF. 30.3% are looking to expand service offering in next two years.

There is some level of preparedness to change, but change management is a significant issue within practices.

Practices with >400 funds are growing 198% faster than the average practice. And so administrators are playing an ever increasing role.

The projected change in SMSF revenues over the next 3 years is 22% (more buoyant than 13.96% growth in past 3 years).

39% will increase exposure to SMSF sector. 31% will move to regular reporting. And 57% expect to see increased client engagement.

Organisational ‘Reset’

At what stage is a reset going to be required within your SMSF business?

Do you want to move from  ‘generalist’ to specialist’ SMSF business and how many funds are required for that move?

What resources will you need within your practice to move to regular reporting?

At what stage will you have built sufficient capacity into the business to support a greater focus on additional services (eg licensing)?

Do you have the right mix of outsourcing/offshoring to support business needs?

How will you change workflow processes within your practice to support new TBAR requirements?

How do we deliver a more client-centric focus (eg online access, prospective communication, increase touch points) 

Recipe for Future SMSF practices

High performing future SMSF practices will show:

Willingness to change – requires a top-down approach, involving engagement across all levels of the business.

Key focus on SMSF specialisation

Sizeable leverage of technology within the practice

Standardised processes for implementation

Consistency across the business – strong understanding and linkage back to the fund’s deed

Regular reporting business model that links to your customer segment (i.e B2C and/or B2B). ‘Regular’ will be dictated by the customer

Value proposition that goes well beyond annual compliance

Pro-active role in management of contributions, pensions, TSB, etc

Regular touch points across face-to-face or digitally through automation

Pricing model that provides annuitised revenue to the business and helps to increase business valuation

Strong digital engagement – accessibility and content

Digital marketing as a core strategy to leverage new business & retain/enhance existing

Education as a key platform for clients to understand their obligations as trustees

Strategic decision to be licensed or unlicensed

Appropriate risk management in place to ensure compliance with legislative requirements

Seven steps to modernise

# 1 Define & document your strategy – only 35% have done so!

# 2  Set a timeframe around key deliverables for your SMSF business model. Subject to the number of funds in your practice time frames should be around 1 to 2.5 years

# 3  Invest regular resources (consistently) into furthering your SMSF business. Spend 4+ hrs per month on implementation and improvement of SMSF business model

# 4  Leverage  the technology to its full capacity to drive efficiency. Aim for 80% + efficiency within 2-3 years.

# 5  Aim for regular processing that can provide timely information and decision making. Only 38% currently do so.

# 6  Utilise fund and member analytics to prospectively engage with SMSF clients. Less than half (47.22%) do  that at the moment.

# 7  Revisit your pricing model and how often clients are invoiced. 67 % continue to bill based upon time cost. 65% still use annual billing.

So these are Aaron’s notes and thoughts. We just edited them slightly to make them fit.

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Disclaimer: Tax Talks does not provide financial or tax advice. This applies to these show notes as well as the actual podcast interview. All information on Tax Talks is provided for entertainment purposes only and might no longer be up to date. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s personal circumstances. 

Last Updated on 05 May 2020

Tax Talks spoke to Aaron Dunn - CEO & Co-Founder at Smarter SMSF - for more details.