The SMSF Opportunity
Today…
There are 442,528 funds, with $399,892 Billion of
FUM[1], of these 90% have two or less members.
Each year there are in excess of 30,000 new SMSF funds created. Yet, this is very much a “cottage” industry, with the largest SMSF administration firms having less than 6,000 funds (there are only a handful of firms with greater than 1000 SMSF’s in Australia), and the typical accounting practice is processing an average of less than 20 SMSF’s.
Each year there are in excess of 30,000 new SMSF funds created. Yet, this is very much a “cottage” industry, with the largest SMSF administration firms having less than 6,000 funds (there are only a handful of firms with greater than 1000 SMSF’s in Australia), and the typical accounting practice is processing an average of less than 20 SMSF’s.
This
has several affects on the SMSF industry:
- There are no economies of scale, such as those achieved by the Retail and Industry Superannuation funds.
- Accountants, typically have no incentive to maintain the specialist SMSF skills, or even the more complex trading activities, due to small number of clients.
- Active investors, are heavily penalized, with per transaction fees and excessive SMSF costs (fees are typically between $1600, and $6500 per year).
- Due to AFSL licensing, SMSF’s are typically established by Advisers, rather than accountants.
- Due to the high SMSF compliance costs, and the restrictions on the AFSL license advice, new SMSF funds will typically require a minimum of $250,000 to be established.
- Australian Investors, are looking beyond Australia for returns, the Apples and Googles of the world.
- Advisors don’t want to know about SMSF compliance, Accountants don’t know about the current generation of investments, corporate actions etc.. especially with global investments now available to everyone; SMSF administrator need volume, and fully audited automated data entry.
Changing winds…
Almost all Australian investments have produced negative returns, and in many cases the the capital losses will never turn around, forcing all Advisers and Investors to address the only thing they can control “Costs”.
The days of paying any amount of money for advice and SMSF administration are over. If an investor cannot get the returns, then they are looking at stopping the fee leakage from their investments.
Top
drivers for change:
- Movement from set and forget Managed funds, to fully transparent active investments;
- Movement to a Global focus for returns, the Apple, Google etc.
- The need for full transparency, and "control" over their investments..
- Movement of investments out of Retail and Industry Superannuation into SMSF’s (see recent entry into SMSF’s by AMP etc);
- Typical generation X/Y want real-time, on-line access with full transparency, and control; to all their investments available 24*7. Typical these are sub $250k investments which cannot get into SMSF’s today, due to the high fee’s. These are the wealth creation investments, most baby boomers are stagnant, or trying to recover the last 5 years of losses.
- The outsourcing of data entry to offshore (Indian) processing centers, has come full circle, very low cost "people" are never long term, churning data entry centers to the "next" third world country is very expensive..
- Managing investment portfolio’s is traditionally very.. very.. labor intensive, typically 60 full time staff can process about 1000 portfolio’s. Full service advisers can pay between $300 and $650 per month for fully managed portfolio’s.
- SMSF’s have very specific compliance, and audit requirements, one cannot simply add SMSF functionality, to an existing retail superannuation fund. AMP bought Cavendish SMSF Administrators to underpin their new SMSF offering, Cavendish is typically $2,000+ per year service.
The Solution.
After some 12 years of R&D and product evolution, the
100% automated investment portfolio and fully managed SMSF admin service is now
available.
Features:
- 100% fully automated investment processing via our Broker Portfolio Service (BPS), this is the first and only lights out (zero people) portfolio management solution and is the result of over 10 years of R&D.
- Support for 60 global markets, across wide range of investment types, 16 currencies, and fully compliant with Australian reporting and tax regulations.
- ATO registered SMSF service, which can submit a SMSF tax return to the ATO (one of only two companies).
- Typical processing of an end of year tax return, for an global portfolio through to SMSF tax return, in less than 2 hours.. This result is independent of the number of investments or transactions, another Australian first.
- We have partnered with a SMSF specialist providers, to offer a set and forget SMSF end of year tax and compliance service from $500 per year, there is nothing that gets close to this today. This is an Accountant practice centric solution, i.e each group add their specific expertise to the "Client Solution".
- As BPS produces a daily fully audited portfolio position, SMSF administrators can focus on the “end of year” process, and hence schedule/manage their labor requirements.
It's Available now..
- The very first true sub $600 SMSF set and forget solution.
- Yearly fee is not dependent on number of investments, or transaction volume, hence does not penalise active investors, their Advisers or Portfolio managers.
- Low fixed fee, allows AFSL licensed Advisers to recommend SMSF establishment for clients with less then $250k threshold, and hence will open up SMSF’s to a significantly increased pool of people, such as Gen X/Y. This offers Advisers the opportunity to lock in a growth stream, unlike the baby boomers, who are seeing a decrease in wealth.
- Cloud based, solution can scale to all of the 442,528 SMSF funds, in existence today.
Charles Moore
CEO VillageMall Pty Ltd
Disclaimer The contents of this site should not be understood to be accounting, taxation or investment advice but rather as general product related educational information that may or may not meet your specific requirements.
