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SMSF Series #3 – Aaron Dunn – Transcript

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SMSF Series

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SUMMARY KEYWORDS

smsf, advisors, technology, industry, people, specialist, business, funds, clients, practitioners, sector, evolve, servicing, advice, continue, specialization, trustees, happening, years, asic

SPEAKERS

Aaron Dunn, Fraser Jack

 

Fraser Jack 

Welcome to the x y advisor podcast, a global community of financial advisors sharing and learning with one another to drive the positive evolution of financial advice. To get involved, go to x y advisor.com. Or simply download the x y advisor. This series is brought to you by super galleon, a specialists self managed super fund administrator, known for their client centric approach to their full service solution. If you need SMSF support or CPD, check out the Knowledge Center or sign up for Super Guardian updates at Super guardian.com.au. Welcome back to the Expert Advisor podcast. I’m Fraser Jack. And today we are still continuing with our self managed Superfund series. And I’m joined by Aaron Dunn. Good Aaron, how are you? Very well, thank you. Now you’re from a smarter SMSF. Don’t tell us about that.

 

Aaron Dunn 

Yeah, so smarter. SMSF was established probably eight or so years ago, some people would remember previously, the SMSF Academy that we founded, business has evolved over the journey. So the name needed to reflect that change as well. But ultimately, what we do is we help accountants and advisors in the area of SMSF, predominantly in two key areas, so around accredited trading, and also in documentation. So the ability to establish new funds, pensions, and so forth. And we do that with a, I guess, a technology focus. And bringing those two things most importantly, together, because within the SMSF space, there are they have their own nuances, and certainly not only understanding the rules and how they work, but being able to implement is of critical importance as well. And given that we have that specialist head on a lot of people rely on that technical expertise that we have in that specialization to effectively implement.

 

Fraser Jack 

Yeah, fantastic. And one of the themes that certainly come through a lot of these conversations I’m having is, is there as it was always done very manually, in the in the better that the technology can make things, you know, simpler and easier. And also the training part, the you know, the training part from you know, the the members, the trustees, the advisors, all the other professionals around the around the outskirts of it, not just not just you know, planning. so fantastic. Great to read to chat to you. Now, tell us about your How did you get into this tell us about your journey? Yeah, so

 

Aaron Dunn 

fell into it, I guess. God back in the in the mid 90s. so shy my age, and those of those are old enough. And remember, they were called excluded funds back then. So self managed super funds, as an industry didn’t exist until 1999. So yes, I started out as a just a graduate accountant. So CPA by trade now, and but worked within a business that was a practice that had both accounting and financial advice into it. And ultimately morphed into what was known as snowball Financial Group. And then that opened up a whole range of opportunities, more specifically in the SMSF space where over a period of 10 or so years, we created quite a sizable SMSF business that supported a network of advisors right around the country. So from that I was sort of going on this journey of change each and every year, because we would see acquisitions in the business. All of a sudden, you know, I would be doing trips to Sydney regularly and then we’d have advisors in Perth in Queensland. And there was this technical, I guess, service and need for information. And then we would naturally pick up a whole range of SMSF work off the back of that and to the point where we ended up building a specialist division out and I became the head of SMSF in that in that organization. And then it was around the superannuation System Review in about 2009 2010 that I actually started writing a blog myself, and the chair of that super System Review, Jeremy Cooper sought me out for a friend for discussion. And obviously, for some of the content that I was writing at that point in time on phase three of that super System Review now, to get a meeting request with the chair of a government review is quite challenging and it’s in itself so For me to have a phone call from Treasury asking for me to come in, I rang the CEO of our public company at that time. And he said, What have you done? Are you in trouble? And in essence, I said, No, no, no, I’ve got a meeting with Treasury in the chair on on Tuesday. He’s like, I’m coming. And I said, No, you’re not. So I don’t know how well that went down. But anyway, so I spent, you know, a good couple of hours with Jeremy, you going through a number of things, and I resonated, which was really, really positive, asked me to make a submission around those things. And fortunately, some of those actually did become law. And a lot of it I spoke about were what I call the book ends of our system, and the fact that we did need to improve the advice process. And we also needed to tidy up the audit component of the industry as well. And here we are today, where we do have regulations around who can actually provide advice, and who can actually conduct the audit, both of those obviously, governed by ASIC today. So yes, I feel like I did have a bit of a contribution to that some of that some people may hate me for it as well. But the reality is, is, you know, one of my own personal mantras is to make sure what I do in the SMSF industry each and every year, leaves it in a more positive step for it to progress into future years. And I’ll continue to do that. And so that sort of took me through to that point in time. And I could see this opportunity to really look at competency and see the industry growing. So I took that opportunity to sort of go out on my own, needed to sort of build up to the business as to what it is today and focused on that training component. But then again, as we’ve done more and more work, research into the industry, it has evolved. And we’ve seen that it’s fine to be able to train people and know what to do. But it’s that effectual implementation that people need. And again, we’ve started to really identify that and hence why we built out now a membership based business that people can not only access the training courses and stuff that we run, but they can then also, as I mentioned up front access documentation to effectively implement, like I said, from setting up a fund all the way through to income streams, and when a member dies, and so forth. So it’s been quite an interesting journey. I’m never bored. But I think, you know, the flexibility of giving me the time and energy to do what I’m really passionate about, has been very rewarding on my side of things.

 

Fraser Jack 

Yeah, fantastic. And you can definitely hear the passion in your voice as you speak about it. Obviously, you’ve, as you just said, before, you’ve seen a lot you’ve you’ve been through a lot done, it’s a lot of the things that come out of this is it is a particular sector where experiences is key. And obviously there’s a lot that can go wrong. And the best way to learn that is, is well knowing about that to start with but also prompt somebody that’s been through it before. And has has made those you know, seen the mistakes happen and know what to avoid more than what to do. Now, yeah, Jeremy, Jeremy Cooper is a is a great, great gentleman. We had him on the podcast a few weeks back. So if you haven’t heard that, that episode, go back and have a listen. But But I can just imagine your boss waiting for you to go to a door government. You know, I said always like an inquiry. You know, this is a positive thing. I’m pretty sure they would have been freaking out.

 

Aaron Dunn 

Correct? Yes, I was. When I got the I remember getting the email, remember vividly, and the subscript that the subscriber to the blog posts and stuff. And, and then yeah, it was it was funny, because only a couple years ago, our SMSF conference in Melbourne, I caught up with Jeremy again, then we had a beer and we got talking about the report. And he said, I’ve still got a whole bunch of the final reports, you know, paper copies in their plastic and whatever and, and in he said, I’ll send you one. And he did so he said he sighed, he said thanks for your contribution, really appreciate it. So, you know, even to this day, we we still do keep in touch and talk generally, when we do catch up at events seems a bit of a long distant memory at the moment. But the reality is, is it’s the case. But yeah, it’s good to talk to people about what’s happening in the industry genuinely. And I do spend a lot of time trying to interact within the profession, and with the regulators and the like, because it’s helping not only us to understand where we want it to go. But I think it’s important that the regulator needs to as well because in some instances, they only ever see the bad stuff they don’t really actually get to understand what’s happening in practice and, and having that interplay between being a practitioner but also having that technical knowledge and how it should actually look. I think as a profession, the more that we drive, the standards that we want, rather than trying to be different from us from regulators, I think we’re going to be better off in the long term.

 

Fraser Jack 

Yeah, absolutely. Definitely a hard game by creating regulations and you do it for often for the masses of people, whereas this particular sector, everything seems to be so personalized. That’d be a very, very difficult thing for regulated to create regulation, when so many cases are, you know, different.

 

Aaron Dunn 

Yeah, without question. I think that’s, that’s a big challenge for, you know, we look at in areas such as investment strategy in the, yeah, the HMO had a crack at a couple of things a couple of years ago, around limited recourse borrowing and the fact that people were investing in property and some concerns around diversification and the like, and, yeah, and Ozzy was actively involved in some of that discussion with the ATF then. And, you know, if they had their time, again, the way that they wrote that letter probably wouldn’t have been written that way. But, you know, it should have said that they would have been much better having choice, you do have choice, that’s one of the great things about running your own fund, but it does come with its own obligations that individuals need to be aware of. And that’s the journey for us as professionals to be making sure that trustees are aware of, it’s never about that the the trustee needs to be as knowledgeable as what the advisor is. But it’s got it, they have to be well informed, which means it puts a much higher obligation on us as professionals to know and have a level of specialization and specialized understanding to be able to support that relationship, because there is a lot of implied trust where that trustee does have that relationship with the advisor because of the extra responsibilities that come with them being a trustee of their own fund.

 

Fraser Jack 

Yeah, absolutely. No way, as you mentioned, before you so there’s two main parts of what you do on a on a day to day basis, the big part of it is the training side of it. And then the second part is that preparing in helping advisors through the technology platform with the the documentation. Yeah, let’s start. Let’s start with a lot of the training stuff. How do you provide that at the moment?

 

Aaron Dunn 

Here’s a couple of ways. So first and foremost, we had been building out as part of our platform, a catalogue of training. So we we run quarterly technical updates, by web based training, then we’re running specialist topics. But what I had one of my projects in lockdown in Melbourne last year was to get stuck back into building out a course we did it a few years ago, in partnership with a different business, and then kind of let that go. But what we have now done is we’ve gone back and built out what we call our SMSF foundations course. So something like you know, 50,000 words in lockdown in terms of the course content, but we’ve built out seven modules 21 CPD hours here for practitioners to be able to work through. And we’ve done that in an in an E learning format, where it’s available for the user to be able to look at individually. And they can do that via our platform, or mobile responsive, but we’ve also created it for what I’d call as a wholesale environment. So it could be utilized by licensees as much as an individual. If people have their own learning management systems, then what we’ve done is we can then provide all that file information to them. And we’ve done that with a number of people in recent times, including momentum media, yeah, that that obviously deals with IFA and SMSF, advisor and the like so. So there are two things love to get back on the road, which we’re hoping Fingers crossed, to be able to do we do run face to face events, as well to obviously compliment a lot of the online training that we do as well.

 

Fraser Jack 

Yes, exactly. Right. I love the learning concept. And you know, people can consume that content to their own time on demand, as we call it. So that’s fantastic. But you’re absolutely right, getting into a room with a bunch of people, you know, engaging and having that interaction is is also very good note in the few as this goes. As we talking today. You know, there’s been a few events that have taken place in live rooms and people I think it really seemed to embrace that concept again, and I think we’ve missed we’ve missed it a little bit.

 

Aaron Dunn 

Yeah, I agree. Like I I did my first one about a month or so ago, just before locked down in Melbourne down at the RSA v club in Torquay. And to get up in front of a room or having 20 people again, it was fantastic. I did drop a joke in just to sort of test the room out it was well what’s the difference between me standing up here today? And if you attended any of my training in the past 12 months, and everyone’s like, Where is this going on? What are you talking about? I said I’m wearing pants, so so I got a chuckle and I knew the room was good. So the rest of my presentation was going to work and work quite well.

 

Fraser Jack 

And so are all the people listening to you We just don’t know who’s listening to this podcast and not so there you go.

 

 

There you go. There’s

 

Fraser Jack 

everything about them. I’m wearing pants today. Yeah, good, good, good. I I was gonna say speaking of pairs, but I can’t I can’t make that the link. And the next part I wanted to talk about with some of the research that you’ve done. I, you know, over the last few years, you created a research a few years back called the the future of the SMSF. industry. And I guess that’s always evolving. But But back then you sort of there’s a few key findings from that research and talk about that.

 

Aaron Dunn 

Yeah. So we, one of the things that we’ve seen in the industry historically, is there’s a lot of data on your water trustees doing so what how are they responding? And you know, from an advisor point of view, that’s great, because it gives you some behavioral aspects about what is going on in the industry. But what I wanted to know is, is well, how are we as practitioners actually serving clients. So let’s put the shoe on the other foot year and have a look at what’s going on in the sector. And so we we surveyed, we did this survey in throughout 2018, and published a report in November of 2018. So, things have continued to evolve, but we had nearly 500, practitioners complete this. So you have a broad spectrum, more accountant dominant than then advisor dominant. But what we were able to see across a broad spectrum here was a number of challenges that existed. And if we think about challenges, primarily the biggest challenge, and this applied, it didn’t matter, the size of the business, whether they were what we refer to as a specialist or a generalist, the number of funds they had in the business, it’s all about keeping pace with change. We know within our sector, that change around legislative change is the biggest challenge. And we continue to see even today in the SMSF sector. You know, I talk about technical content each and every day, you know, it’s 100% of my daily task. And I’m literally looking at stuff each and every day looking at something new. So I kind of go, Well, how do practitioners generally keep pace with this stuff? And therefore, you know, it’s part of what our business model was able to identify? How do we distill this information in a way that enables them to do what they need to do? We then also looked at that some of the challenges around technology, how they’re delivering different services into clients, we again, we spoke about that operational way in which they’re running their business, are they including SPSS, as part of the general business? Or are they actually specializing? And what we did see, because this is the third piece of research that we done, is that we now saw about one in five practices that actually built some level of specialization into their business and, and that starts to occur around the 70 fund mark, where a business would have, you know, sort of north of 70 funds, because they could start to justify bringing in specific resources to be able to handle that. So yeah, it was quite a fascinating piece of research really did line up with some of the ATR data that we’ve seen around the the number of funds and the proportions between number of funds that our practice has, and the level of revenue that that really supports that as well. And then, and so forth. So it was fascinating. From there, we’re able to then identify off the back of that some of the opportunities that exist for advisors. So from addressing those challenges, and then what is their key success factor to move thereafter? Yeah, so I guess the main thing out of that, what we did see is from a technology front is we have been reasonable adopters of technology. So Cloud has been adopted quite well. But the pace of technology has been far greater than the pace of organizational change. So this was a concept that was introduced by in a thing called martex. Law. And what we found was very similar here, all the efficiency gains that we saw out of this research was basically provided by the software provider, rather than within the organization. And that’s an that’s a that’s a people thing. That’s a way in which organizations are prepared to make that change. And it’s interesting when I did a presentation at the SMSF, national conference earlier this year, virtually, we went back and looked at that concept and within the COVID environment, we said well, what impact has as COVID actually had on this concept to martex law and the reality is, is we have been quite fortunate as an industry because The adoption of technology and our ability to adapt reasonably quickly due to COVID was a huge factor in us to be able to continue to what we do. And what I mean by that is that we were able to go work from home, keep doing what we’re doing, have meetings online with clients, and drip generally keep things going along. Whereas a lot of industries weren’t clearly able to do that. And that’s redefining the way in which we obviously work generally. But we’re being able to pivot and pivot quite quickly, so that we could respond to those needs. And, and now, it’s this continued uptake of technology, because the pace of change of technology is not going to change, it’s only going to get more and more rapid in terms of what we need. So the way in which we have to respond going forward, it’s not just let’s change for the sake of COVID. And let’s revert back, we need to continue to adapt and evolve. because technology is going to continue to adapt and evolve as well.

 

Fraser Jack 

Yeah, this has been a really interesting thing during COVID. And I guess it’s it’s not just, you know, just in one sector, it’s it’s it’s public in general, we’ve obviously got the advisors evolving with technology. But we’ve also got the the trustees and the the individuals and the members. And let’s just face it, consumers generally, now will know know how to use a QR code. And now they know that they’ve all evolved as well. It’s a very different every every single stakeholder in the process has evolved over that time.

 

Aaron Dunn 

Yeah, and in an SMSF, it’s really sectors really interesting with this, because it has typically been a, you know, in a compliant sense, it’s been a once a year requirement. Now the advisor naturally is having more regular conversations. But this COVID period has arguably reset expectations of Trustees as well, because there is far more as you said, older Australians in particular, who will become more technology savvy just because they needed to it was the only way they will be able to communicate in various forms of life. So to open their eyes up to what technology can do. So if you’ve got cloud based products, which the SMSF industry is really fortunate the technology they have is a real even are in terms of there’s there’s no one organization that has a monopoly or is or oligopoly exists in our industry, because they have proprietary software that is over and above anything else. The fact that there are software providers in our industry that allows for a sole practitioner in the burbs, to be able to generally are given resources to be able to compete with someone that runs multi funds, they’re using the same technology. So from that point of view, the expectations are there for clients. So therefore, it’s up to the advisors and the service providers to be able to kind of step up to the plate to fully utilize the technology that is there. So it’s not the panacea to this to you know, the outcomes that they want for their client. But it’s the enabler to be able to do so. And I’ve always said, when I spoke on this topic quite a lot in the past, how many people in your organization know 100% of your software? Right. And I would argue that there is very, very few, right, and I get one or two arms ever put up in a in a room. And that’s the challenge, right? Because specialization isn’t just you need to be technically very strong, you actually need to know how to extract every, you know, every last little bit out of your software to enhance the value proposition that you can provide to your clients. And again, that’s not just SMSF specific, because there is what I find a lot of times, there’s a lot that is left on the table, because there’s not the time effort and energy that’s put into systems and processes within the organization to continue to look at change and improving value to your clients. Because in a in an SMSF sense, what we see is the more that practitioners continue to do the same as what they do, there will be elements of that, that automation and AI and machine learning and stuff will start to compress down, which is then going to impact on the pricing that can be charged. So I talk about maintaining value by value stacking. And therefore it needs people to spend time, effort and energy into you know, what their key resources are within their business. And that includes their software.

 

Fraser Jack 

Yeah, exactly. And, and that Now, you mentioned that 70 funders is an interesting number for specialization, but just on the just on the content. Before we get into the into that specifically on the concept of specialization versus the general and I’m going to refer to the medical industry here. Obviously there’s specialists in the medical industry and then there’s GPS or general practitioners. And to go see a specialist, you really are referred by a GP as they they sort of do that triage I guess you could call it to see if this is appropriate to you. But then bit in our sector, we sort of have specialist and they can public can go directly to.

 

Aaron Dunn 

Yeah, so it’s the perfect analogy, it is the perfect analogy, because that’s what you would expect to have happen. It doesn’t always happen. I mean, we do we do work whereby we we do get, we have a surgeon, so we get asked to come in and, and look at specific tasks. But part of what we’ve done there is we’ve also then tried to, as part as our business model, try to automate some of that surgery. So machines do some of the surgery now, if you think about it in a hospital, as well. And so how can we actually evolve that as well to ensure that we’re sure this IP that we know in my head and my team’s head to be able to effectively implement and deal with, again, a payment of a death benefit as an example. But it doesn’t mean that I’m the one that has to do that work? Can we build a process forms, using the technology and infrastructure there to enable the advisor, the accountant, whoever it is, the trustee if need be, if they’re capable enough to do it, to be able to go through a triage process, and then actually produce the documentation that they would need now that that will apply, whether it’s advice, whether it’s compliance related. So there is a real opportunity here for those that specialize in this area. And I think that’s I spoke about up front about the advice gap, as well. Because those that really specialize and specialize quite deeply in this will pick up a lot of work because of that general gap. But it is a large challenge going back to your original question, because we don’t see ordinarily, the, this is outside of the scope of really well, I’m skilled at but they still try and sort of punch through Oh, hang on, let me grab the scalpel. And I’ll try and cut an incision here. And, yeah, it’s not too bad, but it’s not perfect. And and that’s not, you know, it’s not the right way to go about it. And so hopefully, as this industry evolves, and, you know, it will become interesting, interesting, with the advice landscape moving forward, there’s always been this discussion about, you know, whether there needs to be a an additional layer within the regulations about being able to provide specialist advice in the SMSF sector. And that’s really determining who should hold the scalpel?

 

Fraser Jack 

Yeah, it certainly isn’t. And we’ll get into the technology piece shortly cuz I want to go through that as well. But before we do that, we you sort of touched on the idea of what the the advice framework is at the moment, and let’s sort of go through that, what it where it’s come from some of the some of the framework that worked and didn’t work and what that might look like in the future.

 

Aaron Dunn 

Yeah. So to me, the concept of limited advice framework clearly hasn’t worked. I get the rationale as to why the government wanted to do it. I’m, I’m certainly in the camp where you know, that the port imposing a limitation on just being able to set up an SMSF? Without any sort of advice? I’m certainly was an advocate for that, because I think there are too many stories of people going in for the wrong reasons. And and that does leave a bad taste in the sector. That is how hardly Yeah, moving and moving along quite strongly. And every review that happens, kind of supports that. So we still need the robust framework that sits around it. But there is a recognition that the current arrangement doesn’t work for accountants, and there is a need to have to revisit that and but revisited in line with a lot of the other work that’s being done with financial advisors at the moment, which is, of course, so we’re seeing single disciplinary bodies, we’re also seeing adjustments around the requirements have to comply with the tpB, and sort of consolidating a lot of the the process and one of the things that I’m a big advocate for going forward is, is this kind of simplified advice piece for SMSF. Now, last year, with COVID, we saw a legislative instrument being issued by ASIC to allow for a record of advice to be provided. For someone that wanted to really access the 10k. early release now was not used very much at all because it had limitations on the amount you could charge and so forth. But conceptually, I think we were not far from getting that right now that not only included advisors, but it also actually included accountants in that to be able to actually have some conversations with clients around those things. So So I’m actually four Coming up with a solution whereby we need to break out the concept of strategic advice. And look at that independently and separately from the investment advice piece now, what how that looks is obviously part of the discussion that we need to have ongoing. But smss have always been first and foremost, a strategy focused industry. And then second, is becoming a an investment strategy focused sector. So, we’ve got to address those two things independently. Now, sure, there are going to be advisors that overlap in those things, and great for them to be able to do so. But that’s the challenge, I think that we need to solve over the course of the next 18 months. Because there is a huge gap, it’s great for advisors who work within that space, they should be looking at how they can see that opportunity and fill that gap. And I know many practitioners in this space that do that and do that quite well. But it doesn’t solve the bigger issue. Because, you know, the the many the many few can solve for the, for the me and Australians that are out there that are currently members of SMSF. So and, and simply ignoring it, and letting people go down a self directed path to do it themselves without understanding all the risks is not the right answer, either.

 

Fraser Jack 

It’s interesting, because there’s exactly what I was thinking of when you were saying that is the actual consumer at the end, there in you mentioning the idea of there’s a gap, there’s a gap, there’s a gap, but is anyone pointing out to the consumers? where the gaps are, you know, like, Is there a Is there a follow the bouncing ball system or process in place, and obviously, they you know, there’s there’s, you know, training available to to the members as well, and the trustees as well. But there, there certainly needs to be something that sets out that says, Well, you haven’t actually covered all these different items you shouldn’t be doing right.

 

Aaron Dunn 

And there’ll be a, you know, there’s going to be gaps in that process whereby, again, you know, it may be the accountant having the conversation, but there’s an identification of an insurance need. Now, again, this is where we go back to our GP versus surgeon. It’s not necessarily specialization, but it’s where we start to move outside the scope. And these are all conversations that we’ve been having for years. But these conversations will have to continue to evolve, because the regulations of our sectors continue to evolve as well.

 

Fraser Jack 

Yep, yep. Fantastic. Now, I want to sort of shift a little bit if I can wear into the different stages of advisors and advice practices that do SMSF. So you’ve done some work around this and release some documents and paperwork in our papers, I should say, working papers on this, John’s going to talk about the five stages of an SMSF business.

 

Aaron Dunn 

Yeah, so this followed on from our future of SMSF report. So again, as we were digging through the data, and we obviously published our report, and, and sort of kept going back to it, you know, it’s like a niche that would keep needing to scratch. And I’m like, there’s, there’s more in this. And what we ended up identifying was this concept of what are called five stages of an SMSF. business. And, and really, it looked at the the number of practitioners in the space, what that representation looked like, whether they were generalists and specialists, how they were delivering those services. But the most important thing out of it was, from those five stages, we identified what was the biggest challenge of that stage. And then what was the key success factor to move them from that stage to the next. So the five stages are we started the endangered practitioner. So this is the person that is kind of flailing around in SMSF. You know, like, was saying before that, you’ve kind of given them a scalpel, but they shouldn’t have the scalpel. And, and what we found is, clearly that biggest challenge for them is keeping up to date. But the success factor for them to move on from that is knowledge. So this concept of knowledge of power. So we then move into our steady professional. So this is this is a fairly large representation, but they still see SMSF as part of their broader business. So you know, servicing their clients. And that’s it, whether it’s in the context of an accounting practice, or whether it’s in the context of an advisor. The biggest challenge when we got to that was lack of resources. So I’m just time poor. So I know I need to be doing more, but I literally can’t. And so what we did see in there, and they thought at that point in time, that moving to cloud would fix all their problems. Of course, oh, yeah. Right. So it says whole concept of all it’s not. It’s not cloud. It’s not just moving to cloud, you actually got to build a process for implementation, because it’s about freeing up resources in your business, to be able to then do the things that you need to do to take your cost to that next stage. Then we moved into a specialist provider. So this is the first time that there is a recognition in the business that We actually had specialization there. So we’ve got resources dedicated to doing that. And again, this is where you talked about the 70. Fun. Yeah. So they certainly fund year 7575 80 funds. And you’re starting to see that shift. So so that that batch here that we found was sort of that 70, all the way up to 250 funds there as a specialist provider. So the challenge here was around implementing change. So it systems and processes about how the work is being done. Now, some of it may be have been forced over the course of last little bit. But the the this then requires the success factor is to really get that business process, right. So are you servicing your client once a year? Are you servicing them every month? Are you servicing them on a quarterly basis? And therefore, what does your business model look like? And how does the service that you’re delivering reflect what you want to actually do an act may mean, some clients don’t like it, and you may need to make some decisions and changes around that some might actually come along for the journey. But again, you’re stacking the value on the way that you want to do what you want to ultimately provide them, we then went on to our emerging players. So this is where people have specialized, and they’re growing. And they’re kind of at this business model decision, or am I going to forego some of the other elements of my business to actually go 100% in on this part of the sector. And this is, you know, 250 500 funds, there, they’ve now got, they’ve now got a business process and framework terms of how they’re servicing clients, how they’re charging those clients, etc, etc. So that business model decision is now the big thing for them. That’s their challenge. So are we are we like all chips in? Are we putting them under the table? Is this what we’re doing? So it then becomes a strategic planning thing for them to go, Okay, what do we now need to do to become one of the very big players and, you know, being really influential in our marketplace, and that’s where we come to our final one, which is our industry leaders. So in this space, you know, it’s our data could only really do 500 funds, but there are providers in this space that are now doing many 1000s of funds. And it’s interesting, because the survey found that those that are specialists in a in that major player or industry leader, is setting up nearly 300% more funds than a general practitioner. So the rapid rate, so 20 to 25,000 funds being established every year, I would argue that 90% 80 to 90% of those are being set up in that specialist space, and North because of the fact that it has become so much more specialized, this SMSF sector. So it’s a once you become that major player, it’s all about attracting clients. And then it’s getting your sales and marketing type strategy, because it’s a it’s a very small segment. But it’s a highly competitive segment. Yeah.

 

Fraser Jack 

Well, so that’s, that’s really interesting that those five different areas, and I guess I always put the consumer hat back on and say, Well, you know, are they select? Or what should they be selecting?

 

Aaron Dunn 

Yep, becomes a becomes a pretty when you, when you break it down like that, it becomes a pretty easy choice. If you showed that if you if the consumer could see that sort of framework as to why it especially when those larger players, embracing the technology, using it to its full extent, being highly competitive in its marketplace on a pricing perspective, but still doing it and doing it reasonably efficiently and profitably as well. So yeah, so from that point of view, I think that trend is starting to happen, because advisors are really starting to partner more with the administrators with that specialization. I think that’s a trend that I’ve seen more and more, as opposed to maybe forming relationships with the general practitioner. Because of that, that risk, I guess, that management of, you know, I need to be aware of what’s going on from an SMSF related issue. And can that steady practitioner or that endangered practitioner actually answer those questions? Or are they doing it right for me? And is it actually posing more risk? For me, I know we’ve got a relationship here in referring work and stuff, but it’s not the outcomes, it’s not in the best interest of my client to actually be forging that relationship. So I’m better off having a look at from an administration point of view, getting someone that knows their elbow from their armpit, to actually ensure that that work is done and done right and done in a timely fashion.

 

Fraser Jack 

Yeah, fantastic.

 

Aaron Dunn 

And give me the tools importantly, as well as the advisor, so that visual cue to be able to see contributions and pensions and all that other stuff, which is typically a feature of what that sort of part of the market provides.

 

Fraser Jack 

Yep. And so now talk to me about the evolution of the technology because we we’ve sort of used touch on a few other things. You know, In the past things that have improved on which has been great efficiencies and effectiveness and, and, you know, helping with helping advisors with, with the process and, and those sorts of things. So talk to me about how that’s evolved. But also talk Tell me about what you think it’s going to evolve to in the future.

 

Aaron Dunn 

Yeah, so technology’s initially one because it will, you know, it’s it’s been the real game changer in the industry for, you know, that nearly, probably a decade nearly now, when you think about in the SMSF space, we’ve seen, service providers start to really focus in on their cloud footprint. So from a software perspective, and, as I mentioned, we would now have, of the 600,000 funds, add a guess we’re sort of in the mid four hundreds. So 450, plus 1000, of all smsfs now are utilizing or now have their SMSF, on one of three or four cloud based compliance technology platforms. So it is very significant, the role that technology has had there. So this, this level of adoption has been critical to that, internally, from the accounting point of view, from the adviser point of view, even from the audit point of view. And as I mentioned before, that’s really going to play a significant role on the pricing, we’ve seen a lot of practices move to more fixed billing cycles, or fixed fee ways in which that works being done in an accountant sense where it may have primarily previously been done timesheet based, it’s not happening that way advisors even changing the way quite clearly that they’re, they’re supporting that as well. So technology, we’ve kind of seen the first iteration through cloud and the efficiency that’s happening, the next iteration here is really going to be that impact that machine learning is going to do so we are literally at version 1.0, or 1.1, around what that’s doing in some of the software providers. So you know, this ability to go auto match and auto process transactions and so forth, is really going to be as quite a significant Game Changer where to the extent you’ll go well is a trustee, kind of going to be able to just feed answers into this machine to be able to get a lot of their compliance work done, doesn’t spell the end to, you know, advisors and accountants and so forth. But again, it comes back to those practitioners saying, Well, what are the areas that I can provide the most value to to my clients, and therefore ensure that I continue to have revenue coming into my business. And I’d refer back to before I made the comment of value stacking, you need to know where you can provide the most value. And if you don’t, then you are going to come up against the challenges that technology will present. Because you’re doing things that a machine can do much easier. And even to the extent that we have seen a globalized workforce, in this last five or six years, start to drive pricing down. But the cost of machines, and the ability for them to do the work is going to become even cheaper than a globalized workforce at some time in the not too distant future. So it is really being cognizant as professionals about you know, what is happening from a technology and a trends point of view, and continuing to evolve your business model off the back of it.

 

Fraser Jack 

Yeah, fantastic. And obviously, you know, the very first step in that savings is efficiencies around the business model. And then and then that can drive that price reduction. And, and that competitive pressure to keep the price down a little bit, I guess. Yeah, I again, machine learning. And the more data that comes along with that I’m expecting sort of over the next few years, four or five years, then the amount of data are available for machines to consume in that space will will make them a lot smarter.

 

Aaron Dunn 

Yeah. And the real interesting one is so ASIC there’s quite controversial because ASIC released a factsheet on the costs of smsfs, a few years ago, and it stated that SPSS were about $13,900 a year to run and everyone when you’re kidding me, you’re that far wrong. But you know, they were relying upon historical aiteo data. Now, the way that that was dispelled, was done through the SMSF Association working with providers like bgl, who have you had the best part of 220,000 funds online and sharing some of that data to be able to debunk a lot of that stuff out. So asik has now, you know, removed that fact sheet acknowledged that it was statistically out of kilter. But that’s what technology has enabled an industry to do, where I’m guessing bgl as the example of class to be the same, they’re going to have over a billion transactions running through their platform Now, each of them so the ability to data Mind and look at information. And that’s why the SMSF association is working with them to try and build reports and to get people to better understand based upon more real time information to know what is going on. And the more that the that the association can play that advocacy role, the more that we can, as a profession be driven on standards and expectations that we want to set, rather than coming the other way where we do, unfortunately, see examples of the regulator’s trying to put mechanisms in to protect consumers, but they not using data that can really stack up because of the historical nature of the reporting that occurs within a lot of government agencies.

 

Fraser Jack 

It’s a really interesting point, the more the more information that we can get, the more ads it’s brought to light, the more effectual it becomes. And the more the you know, as you said, there will always oil, there’s probably always going to be some bad eggs doing the wrong thing in a particular professional sector. Instead of just highlighting those, obviously, we need to fix those. But just to just highlight those and tarnishing the entire sector at some, it’s really about saying well handled it. Let’s look at the numbers and the stats here and be be real about it. Yeah, absolutely. Fantastic. So what else is happening in the future for you know, let’s say five years from now we’re going to crystal ball, what, what are we looking at?

 

Aaron Dunn 

So I think, you know, from from the advice model, I’d like to like I said, I’d like to see a far more simplified strategic advice model, this is something that has already been recognized. So FPA Australia, in concert with the SMSF Association and the accounting bodies have all been quite consistent in their messaging about this, which I think is again, a positive step, we want to be professional, we want to be driven by the profession, rather than via the regulator. So I’d like to see a revised framework that that, you know, is mutually beneficial to all, you know, obviously consumer top of mind, but we want to make sure that the the way in which practitioners, generally advisors, accountants, and so forth can can work harmoniously, I guess, within within this SMSF sector. But those obviously, with that level of specialization, as well. From my point of view, I think the the opportunity with technology is going to continue to change. And that doesn’t just happen, I guess, when we talk with the conversations we had before with the software providers, but we are seeing a recognition by government that technology is evolving. So we have seen during COVID, the changes around electronic execution of documents, and the fact that many of those measures are looking to become permanent into the future. We’ve also seen a current arrangement where the government is looking to modernize a number of areas because the superannuation laws are exempt from the electronic transactions act. So to give me an example of that area, the fact that you may be able to undertake a whole heap of record keeping for us missives using electronic means, rather than having to physically sign documents, even binding death benefit nominations, if we can validate and verify the individual through DocuSign or Adobe sign, why do we actually need to have witnesses witness those documents. So these are the discussions that are happening at a government level at the moment in consultation with the industry that will see that technology change continue as well. So and I guess the last one is, you know, this specialization is going to continue to see a gap in service providers. So that five stages I spoke about before, there is a widening gap between the very best and those that aren’t really, you know, playing to the absolute fullest extent in the industry. And the question will then become at some point in time, or how do we have to step in and maybe put in another layer of regulation in that space. And that’s a challenge to the A to in that respect, because, as I said earlier on the SMSF software has been a great equalizer. But there are obligations that some generalists will struggle with, that specialists actually thrive on. So again, unless it’s done by some sort of market forces, there may need to be some other sort of regulation as well. And what all this means, ultimately is is that the industry is in good shape, but it provides advisors with an opportunity to understand again how their business model works, we are continuing to see younger and younger and younger entrants come into the market. So that model looks very different to your 65 and 70 year old, baby boomer type client that has retirement fully wedded into you know what they want to do and how long they want their money to last and for those that get That stuff right will be very successful over the coming years as well. Yeah, fantastic.

 

Fraser Jack 

Thank you Aaron for coming and sharing all of your wealth of knowledge. Now. If someone wants to get hold of you what’s the best way?

 

Aaron Dunn 

Yeah, the best way they can get in contact with us. I Our website is smarter smsf.com you can get in contact with us either our phone number one 395 9476 or you can email us at team at smarter risk missing.com and you’ll find me on social media everywhere. And the handle at smarter business

 

Fraser Jack 

smarter is m SF. Fantastic. Thank you, Aaron. Really appreciate your time. pleasure. Thanks for the opportunity.

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