However, as the super pool deepens, accountants must sort their way through a series of challenges. First, stand-alone fund-establishment firms and administration service providers are upping the ante as the value of the sector surges. Second, an increasingly nuanced investment landscape is creating greater challenges for advisers and leading to more specialisation. Third, rising regulatory complexity in the SMSF space is testing some smaller accounting firms; in particular, as a new licensing regime looms on 1 July 2013.
With further growth seemingly certain in this space, more players are eager to usurp the position accountants have held as trusted client advisers. They are offering services covering the gamut, from full outsourcing of the administration function to fund establishment, end-of-year audits, pension commencements, education support, software provision and technology delivering real-time transaction and reporting capabilities.
In addition to professional administrators, banks are ramping up their services to target clients who require assistance with SMSF administration issues. Then there are SMSF specialists who provide a suite of service options: directly to fund trustees; through financial advisers and accountants; or as a back-office outsourcing service. Research last year in a Vanguard/Investment Trends report also suggests SMSFs are a rising opportunity for financial planners, with most planners expecting their SMSF revenues to increase.
Of course, some accountants will simply exit the SMSF space. But Jai Singh, head of the SMSF administration business at financial services organisation Fiducian, believes accountants have powerful advantages in the sector. SMSFs have given accounting firms a new business stream in a way that the introduction of the GST did back in 2000, he says. “They’ve brought a whole new string to their bow.”
Accountants can upgrade their skills and accreditations, or they can consider exiting the SMSF space. They can also navigate through the SMSF puzzle with the help of an ever-expanding range of externally provided services.
Growing specialisation
Nick Hilton, head of MLC Accountant Solutions, says it is crucial for accountants to be able to provide robust SMSF advice to clients under Future of Financial Advice reforms. He argues that increasing specialisation in the SMSF market around licensing and technology means “you can’t just dabble in it”.
What is emerging, according to Hilton, is a two-pronged sector consisting of specialist SMSF administration businesses and sophisticated accounting firms with a dedicated team that handles funds.
“There’s very much a space for accountants to have a dedicated SMSF division, much the same as they would have a business services division or a tax division,” says Hilton. “We’re absolutely seeing that trend.”
He adds, however, that an accounting firm managing just a small number of SMSFs may have to rethink its model.
“Do they want to grow that part of their practice so they can specialise themselves? Or do they want to perhaps look at outsourcing to another accounting firm that specialises in self-managed super or to a specialist SMSF administration business.”
While some see professional administration services as a potential threat to accountants, others are confident there is room for both. Andrew Hamilton, head of SMSF administration at financial services giant AMP, believes the ever-rising sophistication of the sector means partnerships will come to the fore and challenge the historical notion that administrators are in direct competition with accountants.
“That’s really changing,” he says. “We understand that a lot of accountants want to work in the administrative space but when it comes to the technical know-how, they may need help and support. So, we’re in a position where we can help provide that.”
Hamilton says the complexity of SMSF regulations means it makes sense for accountants to take greater advantage of outsourcing services or pick and choose assistance as required. For example, an SMSF may require advice in the event of a family death.
“They don’t need to outsource the administration to obtain that service,” says Hamilton. “The modular components that we can now provide in this space make it a lot easier for the accounting firm to say ‘I’m doing that administration, but I have a client who has passed away – how do I handle the death benefit?’ They can access that support as a modular service.”
Changing market
As SMSFs seek better returns, they are changing their investment composition and taking advantage of new services.
For example, there is increasing appetite for listed investment companies, with the ASX’s 2010 Australian Share Ownership Study revealing that the proportion of SMSFs holding unlisted managed funds fell from 38 per cent in 2008 to 16 per cent in 2010.
Australian equities remained a popular investment choice for SMSFs, while listed investments and exchange traded funds (ETFs) were also on the radar. ETFs are registered managed investment schemes, but they are traded on the ASX and are typically seen as providing a more reliable income stream than shares because of lower price volatility.
Such investment choices aside, a highly competitive SMSF administration platform market has also emerged as a game-changer. Most of the established players deliver high-level, personalised administration support and in-depth technical advice.
Hilton says the licensing reforms arriving on 1 July this year loom as a critical issue for SMSF advisers. They will force accountants to attain a licence to continue to operate in this space. Hilton says partners such as MLC can help accountants prepare for the changes, including obtaining the necessary education and getting the tools, templates and processes required to deliver the advice. He adds that MLC is finding that many accountants are opting into the licensing regime so they can have broader conversations with their clients than is permitted under the current accountants’ exemption.
With established players and newer entrants delivering smarter and ever more efficient SMSF administration platforms, there is no shortage of choice for trustees and fund advisers – whether it is around licensing or the myriad of other issues.
Hamilton says it is vital for advisers to determine the areas in which they need most assistance, whether it is a full outsourcing service or targeted help in the form of education, software and technical support, for example.
“It really comes down to the accounting firm and where they sit with regards to SMSF administration and the advice they provide,” he says.
Fiducian’s Singh says gaining efficiencies is the key benefit for accountants and their SMSF clients when they engage with administration service providers. For example, through Fiducian they can process financial statements and access actuarial and auditing services through one provider, rather than having to seek out a range of different suppliers.
“We try to give them one platform to access all these services reliably so they can deliver efficiencies and have one point of contact for any additional requirements,” says Singh.
[breakoutbox][breakoutbox_title]Super services for every need[/breakoutbox_title][breakoutbox_excerpt]Apart from the big companies, such as MLC and AMP, a range of other SMSF administration and platform services are available.[/breakoutbox_excerpt][breakoutbox_content]
Apart from the big companies, such as MLC and AMP, a range of other SMSF administration and platform services are available.
SuperIQ is an Australian service that allows access to information and facilities providing a real-time overview of an SMSF’s position. It has three core service models for accountants, covering outsourcing, insourcing and continuing administration within a firm.
Many providers assist with the establishment of SMSF funds and periodic or end-of-year administration, including:
- SuperGuardian – featuring daily online fund reporting
- Dixon Advisory – providing administration and a wide range of advisory and investment services
- Justsuper – delivering quarterly or annual SMSF administration if data is received electronically, or applying a scaled fee based on transactions if all input is manual
- Contract Accounting Services – catering for SMSFs with low transactions
- Fiducian – featuring end-of-year administration and compliance for new or existing SMSFs, plus online fund reporting and processing
- Companies that specialise in online services, such as Cleardocs, DirectDocs, Law Central, Reckon Docs and Heffron. They typically provide an establishment package to set up a new SMSF.
The IPA’s SMSF partners
The Institute of Public Accountants has forged a partnership with AMP and MLC to provide its members with a comprehensive financial services package, including SMSF services. Members can access licensing solutions and other support services that will allow them to continue to advise their clients on SMSFs following the implementation of the new accountants’ licensing regimen on 1 July.[/breakoutbox_content][/breakoutbox]
Technology breakthroughs
As the stakes increase in the SMSF space, competition is also heating up among software suppliers. Accountants can draw on a wide range of SMSF management software to help administer clients’ funds, while the growing acceptance of tools and platforms on the cloud adds another element to the market.
Singh says there is no doubt that technology breakthroughs have played a key role in improving SMSF administration services. Having the ability to communicate and transact online gives SMSFs the benefit of up-to-date information and reporting, while the cloud should also deliver positives.
“It really reduces the IT network responsibility of the accountant if you have your software hosted somewhere and you don’t have to continually get an IT support person in or invest in a terminal server,” says Singh.
Hilton, at MLC, agrees that SMSF funds management software is a strong candidate for the cloud and complements a trend towards outsourcing. While in the past there have been some concerns about data security on the cloud, he believes funds are increasingly at ease with the evolution.
“The same could have been said about people doing their banking online 15 years ago, but now that’s very much the norm,” he says. “You need to make sure they’re using secure systems, but certainly the benefits associated with driving efficiencies and therefore reducing costs to the consumer will end up meaning that you’ll have to do it because you won’t be able to compete any other way.”
[breakoutbox][breakoutbox_title]Super software advances[/breakoutbox_title][breakoutbox_excerpt]The leading SMSF management software tools include:[/breakoutbox_excerpt][breakoutbox_content]The leading SMSF management software tools include:
BGL Simple Fund
BGL is the dominant software player, boasting more than three-quarters of the desktop SMSF software market with its key program, Simple Fund. While the software is older than that on offer from some newer market entrants, such as Class Super, its user base is familiar and comfortable with the tool. BGL has flagged the release this year of Simple Fund 360, a fully online version of the software that promises features such as automatically loading bank, broker and registry data, along with a new reporting engine that makes accessing SMSF data simple and fast.
Class Super
Class Super is a cloud-only product launched in 2010, which led the push to automatically integrate data from banks, wrap platforms and the ASX into software. It provides a general ledger for accounting, as well as investment management software to help accountants administer SMSFs, while using more than 75 data feeds from financial institutions.
superMate
Another cloud option is superMate, regarded as the leading up-and-comer with a low-cost, per-fund model that suits smaller players. The tool provides step-by-step instructions for workflows, such as administering an SMSF, and requires relatively low work to keep fund information updated.
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Competitive future
While the strength of SMSFs is creating greater competition for the management and administration of funds, many accountants have the benefit of strong traditional ties with their clients. However, they cannot afford to be complacent.
AMP’s Hamilton believes accountants who can cleverly partner with accomplished administration providers
stand to benefit, as they deliver better services, more information and stronger results for their clients. The key is to stay on top of changing rules and regulations.
“So, if there’s a change to regulations that may affect pensions or those sorts of areas, they want to know what’s going on,” he says. “The desire for information is growing, so having access to technical information and education is really important.”
According to Hamilton, the growing technical complexity around SMSF regulations – and significant penalties for getting it wrong – means having up-to-date knowledge has never been more important.
“That end-of-year process is becoming more of an issue,” he says, “in particular when you consider penalties [in areas] such as breaching contribution caps are so large now that, once the financial year end is over, it’s impossible to go back and mend those things. The world is changing dramatically.”
