SMSF administration outsourcing trends and options
September 14, 2015| | in category Products & Solutions No comments yet
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.
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