While automation is becoming more prevalent in the SMSF sector, it is doubtful trustees want a human advisory element to be completely eliminated, writes Kevin Bungard.
As cloud-based technology in the SMSF space matures and delivers on its promises of scale, efficiency and business agility, the role of automation and the benefits it brings need to become the basis for a realistic discussion on what automation means for accountants, planners and for the SMSF trustees they service.
How far can technology automate the day-to-day responsibilities of what for many trustees is the management and administration of a substantial retirement nest egg? Is online access and automation just an excuse for flashy graphs and a dazzling array of numbers? Will automation deliver a meaningful reduction in the administration burden, freeing up trustees to do what they do best – focus on their investments?
Based on software provider numbers, over 30 per cent of SMSFs are already in the cloud; even just looking at the 80,000 funds that are administered on Class, I think we can now safely say there is more to cloud and automation than flashy graphs. Automation has the potential to create a future that delivers added value, better client service and removes the need for some aspects of the planner and accountant roles; but does that mean a trustee will not need intermediaries at all?
Four out of five trustees administer their SMSF with the assistance of an accountant or specialist administration firm and two out of five use a planner. What value do they get from these relationships? Is it just data entry, reconciliations, posting debits and credits, and lodging paperwork?
Administrating an SMSF is based on a bewildering and highly complex paperwork trail and to understand what you are doing within the confines of the law you really need to have a thorough understanding of the legislation and keep up with any changes. This is where trustees turn to experts in administration, accounting and financial planning.
So do trustees want automation to remove the human element from the equation? Do we just outsource to ‘get the work done’ or do we go to these trusted advisers for more than that? I think we go to the experts to leverage their knowledge on things we don’t know, to advise us against that bad idea we had and, much of the time, we simply want them to confirm and validate what we are thinking, giving us the confidence and peace of mind to act – that’s something automation will not replace any time soon.
If you compare administrating an SMSF to managing a do-it-yourself home renovation, then you can see many homeowners prefer to pay for the tradespeople who are experts in their chosen field. Likewise, SMSF trustees are happy to pay for the ‘tradespeople’ and industry professionals they need to discharge their responsibilities correctly and help keep them on track.
Investment and strategy decisions will need to be made in the administration of an SMSF that require human expertise and in turn impact on the administration requirements.
Automation can ensure these situations are highlighted, but automation in these instances needs to be supported with human expertise and this may always remain the case. SMSF trustees will need to be guided by industry experts that manage the value-add and focus on client service, rather than just documenting and recording transactions.
With the number of SMSFs and the size of SMSF portfolios set to increase over the next decade, this is a great time to leverage the cloud and automation to provide the solutions and the scale you need to focus on seriously building the SMSF part of your practice. In fact, if you want to remain relevant, then you have to do this. Trustees will demand control over what they see daily and will have clearer plans for the future – and many will have louder voices. Benefits, such as automation, live reporting and greater visibility, will enable better insight and decision-making for the trustee. Automation brings efficiencies, an opportunity for better service and further success to all parties.