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.

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.)


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)