Behind AMP, other institutions are assembling. Westpac-owned BT and ANZ have SMSF administration businesses up and running. CBA, MLC, Macquarie, OnePath, Mercer and netwealth have all dipped a toe in the pool.
AMP has been explicit that it can use administration as a starting point for selling investment products to SMSFs. If it’s right, institutions have a powerful incentive to take a chunk of the SMSF administration business.
So, the traditional SMSF administrators – independent accountants – now have to decide: is this a wake-up call, an opportunity or a fad that will ultimately fizzle out? Here are the cases for each of the three views, presented one at a time.
View 1: Accountants must wake up
Mark Ellem, policy director with software solutions provider Supercorp (now part-owned by AMP) says independent accountants should view AMP and other institutional players as a wake-up call that a ‘shoe-box’ approach is no longer an acceptable model for SMSF administration and compliance.
Ellem says accountants who have the technical capacity to add value should look at making SMSF administration a specialised service and a profit centre within their practice. The rest will struggle to compete. “Accountants won’t lose business overnight – after all, AMP only services less than 4 per cent of the administration market,” says Ellem. “But if they’re too complacent, they’ll have a problem.”
John McIlroy, executive director with independent financial management firm Crystal Wealth Partners, also sees a competitive threat for accountants. McIlroy, who founded and sold Multiport, believes the likes of AMP will earn profits from SMSF administration. They’ll do it, he says, by using technology, product integration and tailored services, as well as by bundling administration with other products and services. They can sell “at a price that competes extremely well with your average accountant – or possibly even give it away”.
View 2: Accountants can seize an opportunity
Hamish Stuart, senior consultant with SMSF adviser iSUPER, wants the SMSF community educated to understand the advantages that independent accountants have over product-selling institutions when it comes to SMSF administration. iSUPER is positioning itself to serve 35- to 55-year-olds who are keen to run their own investments and reject institutions in favour of “control, transparency of fees and independence”, he says.
But Stuart also points out that accountants administering SMSFs have benefited from advertising by BT and AMP on the benefits of administration services.
Matt Englund, managing director of BT-owned Securitor and Licensee Select, is even more positive. Rather than competing head on, he says accountants should consider partnering with institutional administrators for greater efficiency. “Having institutions take over the ‘hygiene’ stuff like SMSF administration should help accountants rethink where it is they really add value,” he argues.
Chris Lumby, head of SMSFs at BT parent Westpac, confirms Westpac’s stance. “We see having a specialist to fulfil product needs as a great collaborative opportunity for accountants,” he says.
View 3: The institutional push will fail
Ron Lesh, managing director with independently owned SMSF software provider BGL, thinks the institutions have made a gross error of judgement. They haven’t recognised that most SMSF trustees yearn for independence, he says. “Institutional control and the product sell are the very things that SMSF trustees have been running away from.”
Lesh believes SMSFs have already begun leaving institutional administrators like AMP-owned Cavendish and Multiport and are returning to independent accountants, and he expects that move to intensify as the institutions market products more aggressively.
AMP Group’s self-managed super fund business – which manages around 15,000 SMSF accounts – has now decided to sell product wherever they have funds under management. To Lesh, this shows they have realised they can’t make money out of fund administration alone. He expects other institutions operating in the SMSF fund administration space to reach the same conclusions and react in a similar way.
Indeed, he says some public accountants are already rubbing their hands in the expectation that an inglorious product-flogging exercise by institutional administrators will only accelerate the rebound back to them.
“My bet is AMP will exit the SMSF administration arena within 10 years, having concluded that a back-end product sell doesn’t work,” says Lesh. It may take some time, he says, but “the end game has to be good for independent accountants”.
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