‘Struggle’ looms for large admin firms, major software provider warns
The margins of large SMSF administration firms may take a significant hit as automation continues to evolve and pricing pressures increase, according to one major SMSF software provider.
Speaking to SMSF Adviser, BGL managing director Ron Lesh said he predicts that the increasing level of automation will see a greater number of individual trustees undertaking their own admin through the use of software or relying on smaller accounting firms to do it as part of an overall advice bundle.
“We actually think people may end up doing it themselves and that’s why we think these large administrators are going to struggle, going forward,” said Mr Lesh.
While a few institutions and administration providers have put considerable effort into building scale, Mr Lesh said he was doubtful of how profitable these ventures would be in the long run.
“It’s not the smaller administrators, from what we’re seeing, being consolidated; it’s the larger administrators that have only got one business and that’s SMSF administration – and it’s not a business that makes a lot of money,” he said.
“I don’t see how there’s going to be a lot of profit in those businesses going forward, personally,” he said.
While increasing scale does lead to some drop in prices, it depends to what extent this happens, he said.
“If you have a look at the SMSF space at the moment, I don’t think a lot of the larger administrators, particularly the ones gobbled up by [banks], were making that much money beforehand. Now, with the additional costs or the other stuff that’s gone with that, I don’t know if they’re making any money,” Mr Lesh said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.