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Fintech thinking needed for SMSF advancement

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Fintech offerings are re-shaping financial services by showing how nimble and efficient common financial and investment tasks can become. For example, robo-advisers have enabled investors to quickly and easily set up an account online, determine their risk profile and be invested into a diversified portfolio in less time than it takes to drive to a traditional financial planner’s office. These start-ups are far more agile and customer-centric than incumbent financial institutions and they use technology to deliver a superior experience for the end user. If the customer experience is their strength, how they deal with intermediaries is their weakness.

 

Intermediaries essential for fintech SMSF success

Although many SMSF trustees are self-directed when it comes to their investments, they rely heavily on intermediaries including accountants, administrators, auditors, and lawyers to operate their fund. We also can’t forget the ATO as a key stakeholder in the SMSF web.

For fintech offerings to achieve significant penetration into the SMSF market, intermediaries need to be catered for. Through data-feeds and leveraging automation of SMSF administration platforms like Class Super, investment related accounting is (almost) completely automated. In most instances, robo-advisers utilise bank and broking accounts that provide data feeds.

By comparison, auditors need to have enough evidence on file to provide an audit opinion on the contents of SMSF financial statements. Although ASAE 3402 certification provides a certain level of assurance on bank and investment data feeds, in many cases, SMSF auditors are still compelled to verify against the source. In a practical sense, this drags SMSF efficiency back in time 10 years as trustees often still need to provide ‘paper’ statements to their accountant or SMSF administrator to enable the auditor to meet their obligations. There are a couple of remedies for this challenge including improved audit technology and automation, and robo-advisers (or the underlying account providers) enabling secure third-party access to source data.

Fintech offerings that can provide a great experience for the end investor while simultaneously meeting the needs of SMSF intermediaries, including administrators and auditors, will have a competitive advantage over their peers.

 

It’s not just about investments

Investment reporting, although the most important part of SMSF compliance, is also the easiest to automate. By automating this crucial part of the SMSF web, a firm can reduce human error as well as processing efficiencies. Remember, the SMSF web also includes contributions, rollovers to and from other superannuation funds, pension and lump sum benefit payments, tracking of member components, payment of expenses, payment of taxes and reporting to the ATO – which is about to get more frequent with the introduction of events based reporting in 2018.

As the regulator, The ATO also has a very strong focus on ensuring funds are complying with the SIS Act and Regulations which is the underlying driver for the vast majority of ‘documentation’ requests made by accountants and auditors to their SMSF clients.

This is where opportunities exist for SMSF auditors to pivot into becoming Regulatory Technology – RegTech – providers. As financial auditing becomes more streamlined and automated the focus will need to shift to delivering solutions that enable SMSF advisers to more easily look after the compliance obligations of their clients.

 

SMSF evolution

For the world of SMSFs to evolve and continue to flourish beyond 2020 industry participants need to start thinking and acting like digital start-ups. Look for areas of client pain and friction, re-design and re-think how those problems can be solved, utilise technology to deliver and most importantly don’t forget the human element as the robots arrive to help us.

 

 

Kris Kitto Author
Relationship Manager | Executive Director , Intello
I really enjoy the opportunity to collaborate with other professionals, especially those who are pushing some boundaries and delivering their services in a new and fresh way. I truly believe that for us to move our industry forward, we need to focus on what COULD BE rather just accepting what we have in the present. That ideal of not being constrained by history, and looking to the future, is a big part of what I bring into our business and also the businesses of professionals I work with.
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Kris Kitto
Kris Kitto
Relationship Manager | Executive Director

I really enjoy the opportunity to collaborate with other professionals, especially those who are pushing some boundaries and delivering their services in a new and fresh way. I truly believe that for us to move our industry forward, we need to focus on what COULD BE rather just accepting what we have in the present. That ideal of not being constrained by history, and looking to the future, is a big part of what I bring into our business and also the businesses of professionals I work with.

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