Lime Actuarial founder and managing director Greg Einfeld established his organisation to improve service levels in the SMSF sector. He shares with Elise Whittaker how important integration arrangements with other providers are and his concerns about property spruikers.
How did you first get involved in the SMSF sector?
I spent 20 years working for MLC servicing institutions and decided I wanted a change. I wanted to help real people and felt in a big organisation the higher up the ladder you go, the harder that is to achieve. I also wanted a different life experience for myself and that was to be self-employed. This led to my decision more than four years ago to leave MLC and set up my own business. Initially the business provided advice and administration services for SMSFs and provided those services we needed to obtain actuarial certificates on behalf of clients from other actuarial firms. In being involved with this process, even though the other actuarial services were good, I felt it was possible to provide a better experience for clients. With this in mind, I launched my own actuarial certificate business, Lime Actuarial.
What were the elements you felt needed improving in the actuarial process?
It was three things, the first of which was speed. I found I was waiting about 24 hours for a certificate and wondered why a certificate can’t be produced instantaneously. Then there was price. We were paying just under $200 for our certificates and I thought why can’t the price come down closer to $100. Then there was simplicity. It just felt like the forms I was completing were a little bit more involved than they needed to be, and the flow of information could have been made easier, along with the layout of the forms. So they are all the things we have really focused on in setting up the Lime Actuarial business.
So have you been able to achieve these improvements?
Yes absolutely. We produce actuarial certificates instantaneously. We’ve been able to do this by taking all of the checks that would normally be performed manually and we have automated them. In 99 per cent of situations the checks say the data is okay and meaning the certificate is produced straightaway. In terms of ease of use, the feedback we get from clients who complete our forms is they are easier to navigate in comparison to what they had been accustomed to in the past. We’ve also been able to lower the price of obtaining an actuarial certificate. When we started producing certificates, most actuaries were charging approximately $160 plus GST for them. We have brought the cost down by approximately 30 per cent, charging only $110 plus GST for our certificates.
Which of the services you offer are in highest demand?
Without a doubt it’s providing actuarial certificates for SMSFs with account-based and transition-into-retirement pensions for unsegregated funds.
Right now how competitive is the SMSF sector for actuarial certificate providers?
Going through the history of the industry, Benzulla, now Accurium, was the first provider I am aware of that built an online process making it easier to enter data online and reducing the turnaround time for a certificate to one or two days. Heffron then started providing a similar service along with Act2 Solutions, who entered the industry as well. Since Lime entered the market nearly two years ago, there haven’t been a lot of new entrants. But I would say there is certainly healthy competition and there are good providers out there. Furthermore, the prices have come down over time, which is always a sign of competitiveness in any market. In addition, as more accountants start using software that integrates with actuarial services, such as Class Super and BGL, it becomes harder for new entrants that do not have that integration in place to enter the market.
How crucial is having an arrangement to supply accounting software providers with your actuarial certificates?
When we launched our business we were Mclowd, that is, a smaller player in comparison to Class or BGL. Since establishing the integration with Class and BGL, we have accelerated the growth of the business. So in terms of arrangements with software providers, I wouldn’t say it is the be-all and end-all, but it certainly helps. Increasingly for actuarial firms it will become important to have those integrations in place because more accountants are using software that have them in place.
Who initiates the certificate integration arrangements?
Most of the time it comes down to the priorities of the software provider in terms of whether they want to be integrated with another actuarial firm or want to add more data feeds from banks and stockbrokers or other new enhancements to their software. Because of this prioritisation process, I think it’s important for any other business who wants to integrate with them to have a good reputation in the market, have great feedback from clients, have the ability to demonstrate clients want to use their service, to keep the relationship going and be patient. It was close to 18 months from the time we had the conversation with Class to the time the integration was up and running.
Where do your new business opportunities come from?
They come from a combination of different sources. We get leads from attending a number of conferences and advertising on Google. Some accountants will visit the websites of our integration partners to see who the affiliated companies are and contact us that way. We are also getting new clients through word of mouth. In some cases we receive new business opportunities when an accountant, who has used our services in the past, moves from one firm to another and recommends the new firm use Lime Actuarial because the experience is much better than that provided by the incumbent.
How do you find the knowledge in the SMSF sector about the need for actuarial services?
It varies. The level of knowledge and understanding is very good across the board in accounting firms and administrators that have a large number of funds. That even extends to many of the organisations that are based overseas in places like India, the Philippines, Vietnam, Malaysia, Sri Lanka and so on where they are looking after a large number of funds. These overseas-based firms are very knowledgeable about SMSFs in general and especially in relation to actuarial certificates. Where I find knowledge at a lower level is in the accounting firms with smaller numbers of SMSF clients requiring a small number of actuarial certificates each year. Most of our inquiries come from these firms, with the most common question being whether an actuarial certificate is needed for a fund based in a certain situation.
What’s the most significant change you’ve seen among SMSFs?
I am going to give you three changes I have seen and if you ask about the biggest changes in the future, it will probably be the same three things again. One I’ll call it specialisation and consolidation, another is automation and the third one is regulation. Let’s talk about regulation first. There are constant changes of all kinds to superannuation generally and SMSFs. You can’t go 24 hours without reading someone’s opinion on what the tax system should look like in the future and that always extends to superannuation. It’s been a big change and will continue to be a big focus in the future. The second area of change is specialisation and consolidation. When I became involved in the industry there were very few accountants or administrators who were servicing more than 500 SMSFs. Four or so years later there are numerous accounting and administration firms looking after more than 500 funds and quite a lot looking after 1000. In addition, AMP is now servicing around 15,000 SMSFs through its acquisitions, so we’re seeing consolidation there. Also the auditor registration process has seen a reduction in the number of SMSF auditors and we are probably about to see a similar occurrence with accountants once the new licensing rules take effect. The third area is automation and technology. The time taken to carry out the accounting and administration for an SMSF today is much less than it was when I entered the industry and that’s the result of technology and data feeds from banks and stockbrokers and actuarial certificate providers. This method of operation is only going to increase over time and extend to other areas. I was speaking to an administrator earlier and he thinks it’s not too far away before we have funds where there is no intervention whatsoever.
Will the new licensing rules for accountants affect your business?
I don’t think it will significantly affect our firm. The vast majority of certificates we produce are for accountants who order five or more certificates per year. This means they probably have to look after 25 or more SMSFs. That would be enough to see them want to obtain their own financial services licence or form a relationship with a financial adviser who can provide the existing services. The practices that may decide to stop servicing SMSF clients would be those who order less than five certificates per year. While we are happy to service those clients, they make up a very small percentage of our business overall.
What would be the one thing you’d change about the SMSF sector?
It would be the rules governing the operation of property spruikers. What concerns me is people are being encouraged or ‘advised’ to set up an SMSF and then borrow money through the fund to acquire property. What’s more, in most of those situations there is a strong incentive for the person providing the ‘advice’ to facilitate a property purchase. Therefore I would like to see that somehow banned.