Is your service proposition at risk?
As technology continues to pervade the SMSF sector, there are some professionals and services that are more at risk of disruption than others.
In recent years, thanks to the new accountants' licensing regime and the Tax Agents Services Act, the historic divide between accountants and financial planners has somewhat lessened. However, when it comes to willingness to adapt to technological change, the gulf becomes a lot clearer.
In general terms, financial planners are more open to bringing new technologies and IT practices into their business, whereas accountants are more resistive to change.
“Overall I think most of the advisers we work with are very good, are actually always looking for solutions that are going to give them more efficiency or are going to be more cost effective,” said Superfund Wholesale director Kris Kitto.
And the accountants?
“Some get it and some don’t,” Mr Kitto said. “Some of the accountants are tech savvy and they are easier to find because they’ve jumped on the bandwagon with Xero, for example, and they’re virtually running their practice in the cloud. But there’s still some who are slower on the take-up.”
Contrary to popular belief, Smithink’s founding director David Smith said technological lags in accounting and advice firms cannot be simply put down to generational gaps.
“Some people say it’s all the Baby Boomers, they’re the ones who are holding everything back. I’ve got to tell you, there’s some very innovative and forward-thinking Baby Boomers out there. I’ve seen Gen Xers who are the stick in the mud,” said Mr Smith. “It’s a mindset thing really.”
Which services will be affected?
The fast pace of technological change in the financial services and SMSF space will see some irrevocable changes in the way SMSF practitioners do business.
According to Mr Smith, administration, financial planning, auditing and tax accounting services will all face some level of threat from technology.
“No one is immune from technology change and all four of those activities will be impacted to one level or another,” he said.
Those who are involved in the provision of basic book-keeping and compliance bases tasks are most exposed to a professional shake-up.
Class Super chief executive Kevin Bungard said that over time, pricing pressure for these services will see clients migrate their business.
He added: “There’s potential over time for [clients] to say 'well, if you’re just doing basic work, if you’re not adding value, what am I paying you for?'”
Aaron Dunn, managing director of The SMSF Academy, similarly suggested automation will drive down the price of basic compliance work, particularly as SMSFs are now attracting a younger demographic.
“ATO statistics show around four in every 10 SMSF trustees are under the age of 45,” he said.
“Understanding where pricing points are will be a relatively important consideration for some of these younger trustees who may be starting with balances below what is the ordinarily ASIC prescribed circa $200,000 amount.”
The challenge for service providers in the future, according to Mr Bungard, will be ensuring they are adding value by performing a role as a trusted adviser or virtual CFO. These are the in-demand, time-saving services – this is where SMSF businesses are most open to investing their money.
“Clients don’t value someone just doing record keeping, they want that done for as cheap as they can get it and don’t see it adding any value whereas if you’re helping them with strategy or planning or dealing with the problems they’re concerned about and providing solutions, you’ll always be relevant,” Mr Bungard said.
One of the biggest threats for accountants in particular, Mr Bungard said, is the evolution of basic compliance work, especially in light of some of the ATO’s automation efforts.
As professionals are well aware, the ATO is removing the need for tax returns through some of the software programs they have underway.
“Their goal at the moment is to do a million tax returns with effectively no touch – the second commissioner Geoff Leeper said they want to drive that up to five million tax returns,” he said.
Mr Bungard said the ATO also has plans to remove red tape and costs upwards of half a billion dollars which will mostly come from professional fees.
“If you’re an accountant focused on providing compliance services or what the ATO considers to be a red tape service and you’re part of that half a billion dollars of professional fees that they’re effectively going to eliminate, then you should be worried about that,” he said.
If SMSF software reaches a point where a large proportion of the administration is automated, accountants could potentially be disintermediated with clients performing the accounting process for their fund on their own, added Smithink’s founding director David Smith
“Would clients want to do that? That’s the question – perhaps they wouldn’t – I suspect some might though,” said Mr Smith.