Growing the SMSF sector in a post-Royal Commission world
Stephen Doulgeridis has been working around finance and SMSFs for the better part of 25 years.
Stephen Doulgeridis has been working around finance and SMSFs for the better part of 25 years.
He shares his views on starting a business in this space, how the Royal Commission is changing how providers and advisers interact, and the things he would have done differently if he had to do it all over again.
What challenges are advisers facing in the SMSF space post-Royal Commission? Or, have things changed at all?
Post-Royal Commission there are quite a few challenges that advisers are facing. There is greater pressure on compliance, improved best interest duties for client engagement and more detail required in knowing their respective clients to comply with the new ASIC regulations. This will result in slower delivery of advice and great pressure on practice costs.
On a positive note, with the large exodus of financial planners from the industry, new client opportunities will avail for stronger practises with good client engagement and service offerings.
When you sold Justsuper to SuperConcepts, did you consider leaving the industry?
After nearly 25 years without a break between jobs I carefully considered all my options. I was very fortunate and humbled during this time to have been approached by many businesses (both inside & outside the SMSF industry) who thought I would be a good addition to their businesses. In the end my love for the SMSF industry won out, and I know that I still have a lot to contribute to the sector.
With the consolidation that's happening - and being encouraged on a regulatory level - do you see an opportunity for growth in the SMSF space?
It is my view that there is still an opportunity for growth in the SMSF sector. With technology playing a bigger part and hence a corresponding drop in the cost of running an SMSF, more fund members are taking a more active interest in their superannuation. As part of this thought process, the SMSF option becomes appealing, especially having control.
It is my belief that accountants and planners will most likely converge in the future due to regulatory and economic considerations. This will in turn help time poor clients who are looking for a one-stop shop that includes discussions around SMSFs as a vehicle to cater for estate planning and intergeneration strategies. The firm of the future is one that offers a one-stop shop of multiple services i.e. accounting, financial planning, legal, finance, etc on one platform allowing the advisor and the accountant to have the one holistic view of a client's affairs. It will also allow firms to provide additional value-added services to existing clients and will in turn also attract new clients.
SuperAA has recognised this trend and has started to offer additional services besides back office SMSF support to ensure that we can adequately support our SMSF clients.
With the level of sophistication today in terms of technology and big data there are so many opportunities within a client database to help grow a business, yet many look and spend much of their time looking externally to grow. Accountants and planners can discover opportunities and develop real, personal and meaningful client relationships.
Consumers have become exceptionally savvy about tracking investments and demanding regular updates on how their funds are performing. How are SMSFs competing with funds that offer things like daily unit pricing?
Providing regular engagement and client reviews of portfolios and offering online access to portfolio valuations, asset allocation and regular reporting helps to foster greater relationships with SMSF clients. Our industry has come a long way over the past five years. All the major software providers are now cloud-based having invested large amounts of money in their software.
In addition, they have opened up their software to many ancillary service providers and financial services platforms via APIs thus allowing for the provision of more regular and updated information around reporting, investment tracking, performance and member balances.
SuperAA works directly with accountants and advisors. What are the benefits of working through an intermediary rather than making your products/services directly available to the public?
SuperAA was founded by our CEO Mike McHenry. He saw that there was opportunity in the market to provide a white-labelled back office SMSF service initially to accountants who were struggling with the following issues:
- They were finding it hard to find or retain proficient SMSF staff and hence could not get access to these skilled and experienced resources;
- They were stuck in a compliance rut which meant they had no capacity to focus on value-added services;
- Most firms would incur write-offs on their SMSF administration which in turn had an impact on the profitability and hence business valuation of the firm;
- They were competing against firms that had embraced outsourcing themselves, therefore reducing their costs and increasing margins.
Focussing on the B2B rather than B2C market was therefore Mike's preferred model. SuperAA becomes a firm's business partner. We provide a professional service firm with a group of skilled team members that will administer their funds and the relationship between our firm and the client and, in turn, the accounting firm can focus on their SMSF staff, spending more time on proactive client relationship management rather than on compliance.
For SuperAA our role is to provide the back-office support to accounting and financial planning firms so that they, in turn, can focus on providing their products and services to direct trustees.
Did you enjoy owning your own business? What were some of the unexpected challenges you faced in starting up your own enterprise?
I thoroughly enjoyed owning my own business. Some of the challenges I faced in starting my own business included:
In the early years finding experienced SMSF staff was a challenge as our sector was still a cottage industry, therefore staff were not willing to move out of what was typically a Business Services role to specialise in SMSFs. This was the main reason why I was an early adopter of offshore SMSF processing. I set up my first operation in India in 2004 and a second operation in Sri Lanka in 2011. As Justsuper was one of many clients of these offshore partners it was difficult to have any input as to the processes of these businesses hence it lead to issues around quality and turn around time.
As the sole owner of my business it was a challenge to get on to the APLs of dealer groups and institutions due to the perceived "key person" risk.
It was a challenge to get accountants to outsource their SMSFs even though they admitted that they were not administering them efficiently and hence incurring write offs. They viewed outsourcing as fees leaving the business even though it was a lower price than the cost to process funds internally.
As the business grew, I quickly realised that to administer SMSFs at scale I needed to invest in technology. When offering a back-office service to many practices around Australia meant that tracking workflow and turnaround times on excel spreadsheets was not the most efficient and practical way to do this. As a small business it was a challenge to invest large amounts of money in technology.
If you were to do it all over again, what would you change?
I would do exactly what Mike McHenry has done at SuperAA. This is why I decided to join SuperAA rather than start my own business again. I would build my own offshore back office capability to support my on shore client facing team. I have been so impressed by how sophisticated and well drilled the operation is. The detail of work, the standard of expertise, the level of training and the systems and processes both in Australia and Vietnam are exceptional.
SuperAA also invested early in proprietary-owned Live Interactive Workflow Portal to manage the relationship between the business and clients. This is the reason why the business will process in excess of 10,000 SMSFs this financial year, yet still commit to a 19-day turn around to complete the administration and audit of the SMSFs. In my 25-year career these exceptional turnaround times are unheard of. Mike seems to have overcome all the challenges that I faced in starting Justsuper and in turn has built an exceptional business.
