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Businesses diversify to service SMSFs: report

The SMSF service provider industry is large, diverse and flourishing, with firms extending their services away from traditional offerings in order to capture more opportunities, according to the latest Macquarie/SMSF Professionals’ Association of Australia (SPAA) research.

The “SMSF Service Model Report”, released yesterday, studied 292 SMSF service providers and their business models, specifically accounting-only firms, financial planning-only firms, SMSF administration-only firms and also hybrid businesses.

It revealed no single business model was dominating, but rather the SMSF professional services industry was expanding far beyond the traditional services of accounting and financial planning.

“Primarily, the majority of people evolving out of the accounting businesses are starting to move out of straight accounting and tax businesses into other areas,” SPAA chief executive Andrea Slattery said.

“If we go into the financial planning businesses, there’s a lot of similarity [where] they are branching out from the more traditional areas and moving into [other] areas, particularly SMSF administration.

“This research shows that they are morphing from traditional businesses – they are really branching out and they now offer a range of services, such as general insurance, estate planning and legal advice, administration and mortgage and broking advice.”

The report also found the industry was characterised by small, often specialised practices, with 62 per cent of businesses servicing fewer than 100 SMSFs.

Nonetheless, a small number of firms have taken advantage of economies of scale to achieve above-average profitability by using technological and process automation to drive greater business efficiencies and increase margins.

As a result, the report found there was significant potential for industry consolidation, with businesses seeking growth through acquisition. However, the market remained challenging as buying intentions far outweighed selling intentions, suggesting business owners needed to carefully analyse and actively pursue potential opportunities while they still existed, it said.

Furthermore, while some businesses preferred to focus on a particular specialisation, others had sought to grow through the diversification of their service offering, it said.

This has encouraged a trend towards convergence, with accounting practices adding financial planning expertise to their businesses and vice versa.

However, the originals of each business still tended to shape the principals’ worldview and their approach to operations, client acquisition and growth, which at times imposed attitudinal barriers that needed to be overcome if the business was to expand into new areas, it said.

“More than three-quarters of the businesses say they are looking to take on new partners or acquire a new business or client base, while only 15 per cent plan to sell all or part of their business,” Slattery said.

“Further to this, what we’re seeing in the industry suggests there is a clear opportunity for practices to differentiate themselves and grow through displaying strong leadership, competency and knowledge, offering peace of mind to clients looking for someone to guide them in these challenging markets.”

Macquarie Banking and Financial Services Group executive director Peter Shepherd said in order to maximise opportunities in an evolving industry, SMSF service providers had to adapt their business model and service offering to the changing demands and needs of clients.

“It is clear that SMSF practice owners and principals benefit from regularly reviewing their business model to determine how they can be driving new efficiencies and achieving greater success within the industry,” Shepherd said.

“Providing more service offerings to clients helps SMSF practices capture a larger share of business, which can ultimately help to increase revenues and profits.

“What we’ve identified is that this is a growing industry and it’s very professional, competent and very diverse – those borne out of accounting are doing as well as those borne out of financial planning, just in different ways.”

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