SMSF administration goes mobile

At Superfund Wholesale we love technology – it can be a great enabler and it has definitely been a catalyst in the growth of our SMSF administration business.

One exciting new development which was revealed at the Class.CUP.Cloud conference earlier this month was the new ‘Client View’ from Class Super. Although Class has provided online reporting to both SMSF trustees and advisers for more than five years via the FundWeb portal, it was definitely in need of a refresh and the new Client View definitely delivers.

What is very exciting with the release of Client View is that its designed to be mobile responsive.  This means both SMSF advisers and their clients can quickly and easily access all key SMSF information from their tablet or device when they need it.  This is extremely useful for advisers who spend a lot of time away from their offices visiting clients. Simply fire up the web browser on your device before or during a client meeting to check contributions, pensions, investment balances and available cash.

Below is a short video clip of the new Class mobile Client View in action:

For advisers who are working with Superfund Wholesale for their SMSF administration needs, you will have the option of being able to customise Client View (both the mobile and desktop versions) to include your logo and match the branding and colours of your business.

In terms of ensuring our services are mobile friendly, we’ve recently upgraded our own Adviser Portal to ensure all the forms for establishing an SMSF, transferring the administration of an SMSF, pension requests and all the other common forms our advisers use can be accesses and submitted via a mobile device.

 

SMSF administration outsourcing trends and options

Accounting and financial planning businesses are increasingly outsourcing specific tasks and processes such as SMSF administration. By outsourcing these non-core areas they can free up capacity and deliver their services to more clients as well as being able to deliver them in a more powerful and meaningful way.
It’s also possible to use outsourcing to broaden the range of services delivered to an existing client base by ‘plugging in’ the expertise of the outsourcing provider. Once again SMSF administration is a great example: A boutique provider – accounting or financial planning –can leverage the scale and technical expertise of a larger provider to confidently and powerfully deliver SMSF services to their client base. Additional benefits of SMSF administration outsourcing include:
  • Faster speed to market compared to building a service offering from scratch
  • Higher quality, more consistent service delivery
  • Less key person risk
  • Lower delivery cost compared to utilising in-house resources

When businesses are weighing up the pros and cons of outsourcing certain tasks, they also need to also consider the opportunity cost of what could be done if they employed their existing resources into other areas of their business. This factor is often ignored when considering the benefits of outsourcing. Offshoring is a subset of outsourcing and the terms are often confused and used interchangeably which is inaccurate. Offshoring is a specific form of outsourcing where business tasks happen offshore, typically followed by a local review and final delivery to theend customer. Offshoring of accounting functions such as SMSF administration also seems to be the current hot trend in certain accounting circles.

On the surface offshoring looks attractive due to the labour cost savings, but both accountants and financial planners need to look at the risksand benefits in a lot more detail before sending SMSF work offshore. Recently I was interested to read that we are now starting to see a reversal of this trend in the U.S with “reshoring” becoming the new buzzword. That is, bringing previous offshored processes back to the home country. The reasons for reshoring are many, but as wages in many offshoring destinations increase at a rate that outstrips inflation, a number of businesses are starting to look at the actual efficiency gains, loss of skill set, negative public image as well as the technological advantages that can be gained by re-engineering the same processes onshore. When we developed Superfund Wholesale we spent a lot of time researching different models and made the decision to invest into technology and people to deliver our wholesale SMSF administration solution rather than leverage lower-cost offshore wages. Our research has shown us that SMSF trustees who utilise advice services are typically more concerned about the quality of advice and service delivery. Price is obviously still important but when itcomes to higher net worth individuals, they are happy to pay a slight premium of a few hundred dollars per year to keep their SMSF administration onshore.
Although investing in technology and quality people initially placed us at a disadvantage in terms of pricing when compared to an offshoring model, the long term benefits we are starting to see definitely validate our decision. Through efficiency gains, innovation and a focus on superior service delivery we and the practices we work with have virtually removed price from the equation. The trend of outsourcing certain types of services including SMSF administration in Australia to specialist providers is likely to continue and grow as businesses refine their own services models. In financial services and accounting we are seeing more specialization and focus on working in certain niches. Businesses are focusing on either a specific client segment (e.g.medical specialists) and providing a wide range of services to that client type, or they are specialising on delivery of a specific service (e.g. virtual CFO) and providing that service to a wide range of clients.The future for financial services and accounting businesses is bright although challenges are coming from robo-advice, removal of the accountants licensing exemption and technological changes. Outsourcing of niche services such as SMSF administration may be a way for advice businesses to provide an additional service or new revenue stream through collaboration, without the large investment required to develop the same capabilities from scratch.

Managed Discretionary Accounts Trend in SMSF Advice

At Superfund Wholesale we see many different portfolio management models being utilised by the advisers we work with. An emerging trend is towards Managed Discretionary Accounts (MDAs) which can provide significant benefits to both clients and advisers.

Traditionally with fully advised clients, the need to provide a Record of Advice (RoA) for every portfolio change tends to allow ‘inertia’ to take over the portfolio, and as a result things that should be sold often aren’t, and things that should be bought are left till ‘another day when I have more time to write the Statement of Advice / Record of Advice.

It costs advisers in terms of resourcing and staffing, and it costs clients because of missed opportunities and potentially higher transaction costs on the traditional platforms. Advisers we work with are constantly on the hunt for solutions that will save them time and enable them to provide high quality, personalised advice to their clients.

We took this opportunity to talk to some of the service providers who are helping advisers to overcome the problems associated with keeping portfolios in the right balance.

ASIC regulations are stringent in terms of trading a client’s account without the correct licences in place, as evidenced by a recent five year ban on a Macquarie adviser for ‘un-authorised discretionary trading’. Obtaining the correct licences and setting up the associated infrastructure would be out of the reach of most practices, but by partnering with the right providers, advisers can tap into portfolio efficiency at cost effective rates.

HUB24 are one of the leading technology providers in the MDA sector. We asked account manager David Leigh for comment about how advisers are using the HUB24 platform to improve efficiency.

“Good technology is an enabler, and can fundamentally change the way advice is delivered, and implemented,” said David.

“HUB24’s market leading managed portfolio capability combined with our state of the art platform implementation technology can help advisers reach a new level of efficiency. For example, a professionally managed diversified portfolio of direct shares will provide greater investment transparency for advisers and their clients, right down to the asset level.

Clients also get the benefits of direct ownership and with the help of their adviser, can have greater control over their tax outcomes, helping to minimise the CGT impact during portfolio changes.”

“Access to professional portfolio construction can lead to lower risk and better linkage between advice, product solutions and client outcomes. Implementation via the HUB24 platform means less paperwork and compliance and by netting all asset changes at an individual account level, transaction costs can be reduced. A professionally managed portfolio of shares also means an adviser doesn’t have to do the reweighting or reallocation, giving them more time to spend servicing their clients.”

The important point to make here is that HUB24 have the facility for advice groups with adequate expertise to set up an investment committee and make the key investment decisions and applying resulting changes across all clients in the specific model portfolios they’ve established.

Within that HUB24 custodial system, an adviser can also appoint managers to provide advice on discrete portfolios of shares. One of the leading providers in this segment is Lonsec.

Bill Keenan, General Manager of Equities Research had these comments on the service they provide: “Lonsec’s equity model portfolios are in increasing demand from planners looking for quality, low turnover portfolios, with a strong 15 year track record. Lonsec offers three key portfolios: Core, Income and Emerging Leaders; and all are available on HUB24 and other leading MDA platforms at a cheaper cost than traditional fund managers”.

You can obtain further information about the Lonsec Core Model Portfolio here (PDF).

Of course, the cost of platforms and payments to external managers may be something that you are trying to avoid, in order to strip out as much cost as possible for your clients. The feedback Superfund Wholesale receives from advisers is that SMSF clients are especially keen to reduce or remove that middle layer of fees.

To cater for this mindset we also spoke to Bruce Williams, Director of Elston, who have spent many years developing their ‘non-platform’ MDA service. We were particularly interested in their performance based fee structure which can provide strong correlation between portfolio performance and costs, something that clients are likely to readily engage with.

“The Elston MDA service is designed to provide direct beneficial and legal ownership of client’s assets and professional investment management based on true after-tax management of assets so the full benefits of strategic tax and planning advice can be realised” said Williams.

“As the name would suggest accounts are managed on an individual basis, providing a tailored, individual approach focussed on after-tax return catering to investors with a high sensitivity to tax, or those in beneficial tax structures such as an SMSF.

For advisers, the offering allows them to provide the type of direct investment solution demanded by high net worth and SMSF clients while enabling them to achieve scale efficiency gains within their practice. This is achieved through reducing compliance risk and costs, managing more clients with less people by reducing administration costs and time through systems and automation of reporting and corporate actions, freeing up advisers to spend more time focussing on core competencies and manage client relationships”.

Williams concluded by saying that “Practices can drive profitability and growth by eliminating platform costs and reducing investment and administration costs. This gives them the flexibility to increase advice margins at the same total cost to client or pass on savings to their clients. Technology and administration benefits allow firms to increase EBIT per SMSF client through vertical integration of systems”.

When it comes to vertical integration of systems, advisers also need to think through how their portfolio management will flow through to the clients’ accountant or SMSF administrators. There is little point managing a client’s portfolio in a more efficient and profitable way if their SMSF accounting fees skyrocket due to an increase in portfolio transactions that the local accountant may be handling manually.

Superfund Wholesale has been working with Elston for a number of years and more recently has been deeply involved in the testing and development of an automated data feed from their MDA to Class Super’s leading SMSF administration platform.

The recently activated Elston data feed provides us with daily portfolio information including trades and transactions, investment holding balances and corporate actions. Advice businesses using the Elston MDA service can tap into our complete SMSF compliance solution for only $120/per SMSF per month – which includes daily administration, annual accounts, tax lodgement, independent audit and technical support.

Just as it is with SMSF administration, by partnering with the right service MDA providers, advisers can achieve customisation that SMSF clients demand, while also being able to provide quality, sustainable, ‘industrial strength’ portfolios.

It’s all about a scalable experience for SMSF clients.

Insourcing, outsourcing, offshoring, co-sourcing: What they mean, and how they could help your business

Insourcing. Outsourcing. Offshoring. Co-Sourcing. You’ve probably heard of these terms. You may even know of companies that are using one or more of them to grow their business.

But what do these terms actually mean? And can you take advantage of them to grow your business?

Insourcing usually means performing a business function internally. For accountants, financial planners and SMSF administrators this could mean either:

– performing the work in-house
– bringing a third party outsourcer into the business to do the work.

Many companies prefer insourcing because it lets them maintain control of the entire operation. But insourcing does have its disadvantages. As part of its normal lifecycle, the business will be adding new services, products and processes to its overall operation. This can stretch current resources, create new processes that need a different skillset, and even have staff members leaving the company.

And when that happens, businesses often choose our second option — outsourcing.

Outsourcing involves transferring a portion of work or even an entire operation to outside providers or suppliers rather than completing it internally. Outsourcing has increased significantly in recent years as companies look for ways to improve efficiency and reduce costs. And with Australia’s high labour costs, and small- to medium-sized businesses often struggling to gain efficiencies in every stage of the value chain, it’s hardly surprising.

Offshoring (not to be confused with outsourcing) is when a company relocates a business process to another country. With many Asian countries having considerably lower labour costs, a lot of Australian companies look at offshoring work to further reduce their labour costs.

Compared to outsourcing locally, offshoring usually lowers their overall operating budget. But the loss of control, quality and associated business risks can increase significantly. That’s why some companies set up business hubs in these countries instead, employing their own staff who are then supervised by existing staff to reduce risk and protect the privacy of sensitive client information.

The most recent concept is co-sourcing, which combines some of the benefits of both insourcing and outsourcing. It’s essentially a business arrangement where the work is done by both internal staff and external workers. This can help businesses lower the costs of their back office or administrative functions while still controlling the critical parts of the client relationship.

Co-sourcing is based on developing a long-term relationship with a business partner. It emphasises traditional values of trust, excellent service and quality you’d normally associate with a partnership rather than a contracting arrangement. The business has more control over the operational process, and assumes a shared responsibility for delivering the final product or service to the end customer.

Here at Superfund Wholesale we’ve been providing dedicated administration services to advisors for more than five years. And we’ve seen co-sourcing work exceptionally well for businesses who use the right service model and take advantage of the latest cloud based technology.

If you’d like to know more about insourcing, outsourcing, offshoring or co-sourcing, and whether they could help you grow your business, get in touch with us today.

How close are we to ‘zero-touch’ SMSF administration? (Part 1)

Unless you’ve been living under a rock (or maybe a collapsed pile of Master Tax Guides), you’ll know technology is creating massive shockwaves across the accounting and wider financial services industries.

And thanks to the investment-oriented nature of SMSF accounting and administrative functions, the self-managed space has already seen significant automation. Transactional data feeds and ‘if this then that’ style coding have been speeding up laborious data input and reconciliations for years.

When used correctly, these relatively simple features (contained in many accounting software programs) can have a significant impact on efficiency. Over the past five years I’ve seen the time to complete an average set of SMSF accounts reduce significantly. And all because improved transactional data feeds and rules now automatically allocate/code a significant number of those transactions. Instead of manually dealing with every transaction, we’re now dealing only with exceptions.

But there’s still a lot of room for improvement.

The key factors that drive efficiencies are:

  1. Getting the right data into an SMSF administration platform/accounting system
  2. Dealing with the data once it’s there
  3. Getting information out of the system for stakeholders.

Getting the data in

So much data can be pushed into an accounting platform these days. Here’s a table showing what SMSF data is (and isn’t) available. (Note: This isn’t an exhaustive list.)

Table_SMSF_500px

Getting more data fed directly into an administration platform means SMSF accounts can be prepared more efficiently. It’s a relatively simple concept, but one that a significant chunk of the SMSF industry has failed to grasp.

The table comes from The SMSF Academy’s Future of SMSF Report (August 2014), which also states 40% of accountants don’t use any data automation for their SMSF clients. And why not? Because they don’t think they have the scale or resources to make it worthwhile.

Unfortunately, that means more than 5,000 businesses (based on 13,033 tax agents) risk the quality of their SMSF service delivery falling behind the rest of the market. And with business owner clients needing better service as they move into retirement, these businesses need to be paying attention more than ever.

Working with SMSF data


Getting accurate and timely data into an SMSF administration platform is one thing. Efficiently converting it into useful information for key stakeholders (members and trustees, independent auditors, the ATO and financial advisers) is another.

Because SMSFs are investment-focused entities and highly regulated, they’re subject to rigid accounting. Most assets, income, expenses and member contributions items can only be treated in a certain way. This means SMSFs are more suited to being automated than other business entities, and will feel the impact of ‘robo-accounting’ a lot sooner.

As I mentioned earlier, ‘if this then that’ transaction-based rules can automatically allocate and code a significant portion of common SMSF transactions. However, there are always gaps that need to be filled. Moving into the 2016 financial year, SuperStream will plug the gaps in employer contributions and rollovers.

Looking further into the future, it will only be a matter of time before the software property managers use will integrate data to plug the gap for rental property income and expenses. The Electronic Service Address for SuperStream may even allow SMSFs to receive remittance advices for more and more transactions.

The ATO has also said it will expand the use of its Standard Business Reporting (SBR) for more robust two-way communication between the ATO, super funds and employers. While the focus will initially be on APRA regulated funds, SuperStream shows that SMSFs aren’t immune to these changes. So the accountants working with SMSFs will either need to change, adapt and use technology to deliver a better client experience, or risk losing them completely.

There’s a second layer of automating accounting transactions. But it’s a little trickier to describe, so I’ll talk about it in our next article. I’ll also talk about how to produce useful information for the key stakeholders, and predict when zero touch SMSF accounts will become a reality.

Part 2 of this article is available here: How close are we to ‘zero-touch’ SMSF administration (Part 2)

How to become a connected SMSF adviser

In late 2014 I attended the Xero Roadshow and was blown away by a presentation by Xero’s Steven Leaney on the journey to become a ‘connected adviser’.

I would define a connected adviser as: Any relationship professional who has leveraged technology and re engineered their business to make themselves invaluable to their chosen brand of client and in doing so creating almost unlimited opportunities for growth.

Although definitions may vary, the concept of using technology to create service offerings which make you the go-to guy (or girl) for your particular niche sounds pretty cool right? Delivering something that the clients you love working with will pay you handsomely for.

The following table compares a traditional advice (accounting) business to that of a connected adviser:

How to become a connected adviser | Superfund Wholesale

The presentation got me thinking, how can an adviser (financial planner, accountant, administrator etc.) working in the SMSF space apply the same principles and become a ‘connected’ SMSF adviser?

Applying the principles learnt from Xero, there are three key things an SMSF adviser must do to transform into a connected adviser:

  1. Identify your ideal clients
  2. Get your clients into the cloud
  3. Leverage and automate everything

Identifying ideal clients

This concept is nothing new so I will not rehash generic information about identifying and targeting a specific niche market.

What I will say is that to become truly connected with the niche you want to work with, you will need to ensure you adequately communicate not just how and what services you provide – but why you do what you do.

The best resource I can provide is this (edited) TED Talk video from Simon Sinek.

The idea is to ensure the clients you will be attracting and providing fantastic cloud based services to the clients that you as the adviser actually want to work with!

Get your clients into the cloud

The core of any SMSF service offering will rely on getting your clients SMSF accounting information into the cloud. Xero is the market leading the small and medium business cloud accounting space in Australia however currently does not have an SMSF product.

Class Super is the Xero equivalent when it comes to SMSFs. Although there are a handful of other providers, Class is definitely the most advanced and connects to the Xero ecosystem via an integration with Xero Practice Manager (formerly WorkflowMax). It is also worth noting that the majority of large SMSF administration businesses use Class Super.

From an SMSF advice perspective, a cloud solution provides the following benefits:

  • Access to the clients financial records anytime from any device
  • Accounts kept up to date through automated data feeds from banks, brokers and investment platforms
  • Single ledger means everyone can work on and advise from the same information (accountant, auditor, adviser, client)
  • Integration with other cloud planning tools such as Xplan
  •  
    In addition to using Class (or an administrator who uses Class) for your clients SMSF accounts, to become a connected SMSF adviser you need to look at cloud solutions for other aspects of your business. Your planning software, document management, CRM and marketing tools can reside in the cloud and you will need the flexibility the cloud provides to truly create the business you want.

    Leverage and automate

    This is where the fun begins. The connectivity the cloud provides enables opportunities to leverage the investment in cloud technology to automate routine processes within a business, creating efficiencies and the ability to take on more clients with the same number of staff (even for a sole practitioner) or to go deeper and provide more services to existing clients.

    Let’s look at the following example: A small financial planning practice differentiates itself by providing a small number of proprietary direct equity model portfolios to their SMSF client base. The process of re balancing client portfolios every time the model changed was manual and cumbersome, and took considerable staff time. Each trade had to be manually calculated on spreadsheets and the trade orders submitted individually to the broker.

    In addition the advisers within the practice always struggled to provide advice on the fly to the SMSF clients as they always had to cobble together ‘best guess’ information by combining out of date financial statements with transactional and investment data to get an up to date picture of each SMSF.

    An alternate cloud based solution this practice could use would include:

  • Utilising an SMSF administrator to move all their clients accounting onto Class Super
  • Plugging their models into a portfolio tool such as Financial Simplicity
  • Changing to a broker that could receive bulk orders generated from Financial Simplicity as well providing a data feed to Class Super
  •  
    Leverage Class Super | Superfund Wholesale

    Working in a clockwise direction starting with the adviser at the top of the above diagram, the integrated cloud technologies would come together as follows:

    1. The adviser would load their proprietary model portfolios (intellectual property) into Financial Simplicity
    2. Financial Simplicity would pull in details of the SMSF clients’ portfolios from Class Super and compare to the applicable model (determined by the adviser) to calculate the trades necessary to re-balance the portfolio
    3. Advice and compliance documents generated for clients and orders required to re-balance client portfolios pushed through to broker for execution in bulk
    4. Broker provides data feed of transactions and holdings to Class Super
    5. Adviser accesses up to date client portfolio through Class’ FundWeb online reporting or via the reporting integration with Xplan

     
    The above is just one example of how the cloud can be leveraged to enhance business efficiencies and service levels. There are many other areas within an SMSF advice business where other cloud and integrated technologies could be used including:

  • Billing and fee collections
  • Quoting and fee agreements
  • Review appointment scheduling and reminders
  • Marketing and client education
  •  

    Bringing it together

    Both the financial services and accounting professionals are in the midst of major disruptive change being driven from technology. With change comes opportunity and by leveraging cloud technologies SMSF professionals have the means to re-engineer business models to reach new clients or reinvigorate and deepen existing client relationships.

    Don’t let yourself be a servant of what is – become a shaper of what might be!

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