As the Self Managed Super Fund (SMSF) sector continues to go from strength to strength, an ever increasing number of service providers are joining the crowded marketplace in an attempt to get their slice of the half-trillion dollar SMSF pie.
As competition grows and consumers start to become spoilt for choice, administrators are increasingly considering competing on price in an effort to grow their market share. This is putting tremendous pressure on both large and small SMSF administration firms to better harness technology to “industrialise” their processes, in an attempt to remain profitable and relevant in a rapidly changing market.
However, trying to build a lean, scalable and low-cost SMSF offering by “homogenising” a book of funds to better suit a particular accounting package has some inherent challenges. The very reason many clients decide to set up their own fund is so that they can have the freedom and flexibility to invest in whatever exotic and unusual assets they choose. While they may initially be excited by the offer of setting up their own low-cost SMSF, when faced with the reality of being restricted to a small group of investment types, many clients may find themselves asking why they bothered leaving their similarly restrictive retail or industry funds.
Here lies the catch-22; many of the clients who are initially drawn to setting up an SMSF by the offer of a simple and inexpensive product will soon start taking advantage of the freedom of a self managed fund to invest in non-standard assets like derivatives or structured products – at which point the scalable and low-cost homogenised business model starts to break down.
Service providers are in danger of creating SMSF products designed around the needs of the SMSF administrator rather than products whose design is primarily driven by the needs of the client.
So, the question is: is it possible to offer an attractive SMSF “product” which is both profitable and scalable, while also being flexible enough to not simply resemble a non-custodial wrap account?
The solution may lie in bringing together portfolio management services with SMSF administration and accounting services, therefore allowing service providers to move further up the value chain.
By taking advantage of integrated software solutions that provide one unified platform for managing investment portfolios (both SMSF and non-super), while also producing all of the necessary financial statements and compliance documents, administrators can expand their revenue and provide a complete service to their clients.