Accountants want to add more fund clients.
Self-managed superannuation funds (SMSFs) are a lucrative area for accountants. The 470,000 self-managed funds account for $390 billion, nearly a third of the $1.2 trillion superannuation investment market. That total is likely to grow as more people leave retail funds for specialist advice.
The tools accountants use to administer these funds, SMSF management software, have also been shaken up by the move to the cloud and there are some parallels with the accounting software market. Incumbents such as BGL have taken several years to develop cloud versions of their software to compete against newcomers such as Class Super. But the rate of takeup of cloud software in SMSF management appears to be relatively slow, at least according to the desktop software companies.
Super funds management software is a good candidate for the cloud. Trustees, accountants, advisers and auditors all need to have access to the same information which is much easier when it is stored online. Another driver is the need to improve efficiency when looking after multiple funds. The suburban accountant looks after anywhere from five to several hundred self-managed funds; an administrator can look after more funds using features such as automated bank feeds that reduce the time to manage them.
BoxFreeIT spoke to four software companies about their plans for cloud software. Two companies already have launched cloud products while the largest, BGL, will launch later this year. Reckon says cloud software is on the roadmap but has not confirmed a release date.
The SMSF software companies, listed below alphabetically, were happy to talk number of accounts under management but the numbers are unverified. Privately the software companies question their competitors’ claims.
- Name: Simple Fund
- Cloud/desktop: Desktop
- Cloud option: Due September
- Claimed number of accounts: 380,000
- Cost for 25 funds/year: $1056 base price, $2,615 with all modules. ($735/$1,835 annual renewal)
- Data services: Connects to 100+ services including BankLink, Macquarie, ASX, Coin, OneVue, Praemium, Reward Super, SISS and Xplan.
BGL holds the majority market share with an estimated three quarters of the desktop SMSF software market with its flagship program Simple Fund. It has a portal product that connects to Simple Fund and is promising a cloud program by the end of the year.
Managing director Ron Lesh says the company surveyed its clients late last year and only 35 percent were interested in using cloud software within the next one to three years. “Most accounting firms are happy working on desktops,” Lesh says.
Three years ago BGL released a portal product called Portal that gives clients read-only access to reports produced by the desktop software. The portal is used by 250,000 clients.
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A cloud-based SMSF program is due to be released in September but “it might be a bit earlier”, Lesh says. The program will be written to work in a browser on any mobile device and will be different to the desktop software, he adds.
“It will be simplified. It will have all the features for someone to do an SMSF, the lodgements and everything it needs to do. It won’t have all the features we have in the desktop software but it will have automated bank feeds and hopefully over 100 banks from day one,” Lesh says.
The cloud program will also be able to connect to other cloud software including online accounting program Xero (the desktop software has some integration with Xero already).
Why build cloud software if there’s not much interest? “We think the future will be the web, it’s just a matter of when. It’s pretty clear from our clients that they’re not in a hurry,” Lesh says. BGL has picked up many customers from SuperCorp that were unwilling to go along with its transition to cloud software, Lesh claims.
BGL says it adds 7,000 to 10,000 accounts each year from competitors. “Most of the conversions are people who are being pushed to the web or their current software wasn’t good enough,” Lesh says.
Class Financial Systems
- Name: Class Super
- Cloud: Launched in 2010
- Cost for 25 funds/year: $6,250 ($250 per fund/year, min. 25 funds. Volume discounts apply.)
- Claimed number of accounts: 20,000
- Data services: Automated feeds for 75+ services including Praemium, SISS, Macquarie, E*Trade, Commsec, BankWest, BT, Hub24, etc.
The cloud-only Class Super provides a general ledger for accounting as well as investment management software to help accountants administer self-managed funds. It uses over 75 data feeds from financial institutions which speeds up reconciliation and improves efficiency through daily, automated double-entry accounting in the general ledger.
Class Super’s higher price is justified by the inclusion of over 70 data feeds for which competitors charge extra, Bungard says. SMSF desktop software requires accountants to manually import data services which greatly increases the time it takes to reconcile funds, says Kevin Bungard, COO at Class Financial Systems.
“When BGL talks about ‘feeds’ they usually mean file imports. BGL only have five automated data feeds according to their website and you also need to pay extra for a multi-fund module if you want to process data feeds in bulk,” Bungard says.
The goal of improving efficiency is to help accountants increase the number of funds they can manage. Moving from under 60 funds per administrator to between 150 to 200 funds can mean an extra $80,000 to $100,000 a year in revenue, Bungard says.
High efficiency is the reason Class Super is used by half the companies in the Australian Financial Review’s smartinvestor 2011 Top SMSF Administration Providers list, he adds.
Online accounting software such as Xero and Saasu could combine an investment tool with their general ledger systems but “it’s an inefficient way to do it”, Bungard says.
“It doesn’t have what you need from a compliance point of view for keeping track of a super fund. People will do everything in a spreadsheet but the efficiency comes from having a system that knows how to deal with contributions and payments and can generate financial statements that are applicable to an SMSF and do the annual return,” Bungard says.
“One of the problems traditionally with SMSF is that it takes so long to get the accounting done that if you’re wanting to make decisions about your pension and SMSF there’s a lack of information of where the fund is at. We allow the accountant to invite the planners and trustees to log in and look at the information. That relies on the information being up to date.”
Bungard says an article recently pointed to a rise in breaches of contribution caps. “If you lose track of your contributions on top of your normal contributions it can be quite costly,” Bungard says. “It’s an area which planners are looking at very carefully.”
Pension limits are another potential danger. Retirees need to withdraw a minimum each year from their fund or face heavy penalties.
- Name: Desktop Super
- Cloud/desktop: Desktop and hosted
- Cloud option: No launch date
- Cost for 25 funds/year: $1,100 ($45/fund/year, volume discounts apply. $1,000 renewal)
- Claimed number of accounts: 30,000
- Data services: Reckon Bank Direct, SISS, Praemium, BankLink.
Reckon’s SMSF management program is desktop software Desktop Super. It launched a hosted version (sold as a “private cloud”) which runs in Reckon’s data centres instead of on an accounting firm’s own server.
A cloud version is on the roadmap but Reckon says it has no date for when it might launch. “Today we’re not getting a tremendous amount of pressure from our clients. Accountants are used to in-house solutions,” says Sam Allert, managing director of APS Australia.
Accountants are still unsure about using cloud-based compliance solutions because they’re not sure where the data is, Allert adds.
Reckon says its plans for a cloud program would probably mirror those of market leader BGL which released an online portal several years ago to complement rather than replace its desktop software. (BGL is also launching a cloud program this year.)
“We would probably do the same. We have got to take into account the 99 percent of clients that have in-house solutions that give them confidence about security and integration with other applications. Therefore when we do release our cloud offering it would be an ‘and’ discussion,” Allert says.
A client portal would allow accountants to share information in a database with clients and their planners. The portal would connect not just to Desktop Super but all other programs within the APS private cloud suite.
One of the hurdles to moving to the cloud is preserving integration within the APS suite of accounting tools. Thanks to the tight integration between APS’s software, Desktop Super can push tax returns straight into APS’ tax system, for example. This is a major selling point for Reckon over other vendors which don’t boast a full suite of integrated programs, Allert says. But if Desktop Super moved to the cloud it would lose that integration.
It would also take time to port all the features in the 10-year-old desktop software to a cloud program, he adds.
Reckon has cheaper data feeds than rivals because data sourced through Reckon Bank Direct is free. This includes transactions from ANZ, NAB, Commonwealth Bank, Macquarie Bank and Westpac.
Feeds from the SISS service were activated in the July release of the software. SISS charges 83 cents to $2.92 per fund for bank feeds, WRAP feeds and broker feeds.
Allert adds that Reckon includes the whole feature set of its superannuation software from $1,100, but the $45 per fund per year charge can drop to $20 per fund per year with volume discounts. By comparison, BGL charges for additional features.
- Name: superMate
- Cloud: Launched January 2010
- Cost for 25 funds/year: $2,070 ($6.90 per fund per month, min. 25 funds)
- Claimed number of accounts: 40,000
- Data services: Include Macquarie Bank, ETrade, X-Plan, Coin, Reward Super, SISS, OmniCash, Corporate Actions Service.
SuperMate, the cloud stablemate to desktop software SuperVisor II, launched in January 2010 and claims to have 40,000 accounts under management. Parent company SuperCorp is in the process of moving customers to the cloud program from the server-based software SuperVisor for which it is stopping support in the third quarter this year, says David Mendelovits, SuperCorp’s national sales manager.
The majority of customers have already moved across while some larger clients are taking longer to migrate. “Lots of smaller firms have already made the move,” Mendelovits says.
SuperCorp decided to transition to the cloud instead of redeveloping its 10-year-old desktop software. Not only did the latter require a serious overhaul, the cost of setting it up meant smaller firms were unlikely to buy it. “We always found it hard to commit to something that was relatively expensive to implement,” Mendelovits says.
SuperCorp also found that the cost of distributing software online is linear to the amount used, while traditional software on discs had quite a large upfront cost.
The backend of the cloud program, including the administration, tax calculations and data storage, is the same as SuperVisor. But the user interface was completely rewritten for the web so it could run on Android and Apple smartphones.
SuperMate gives step-by-step instructions for workflows such as administering a self-managed fund. It can also apply corporate actions such as share buybacks, share issues or dividends in bulk. An accountant with 150 funds owning shares in BHP can apply a bonus issue across all the relevant funds. “It eliminates a lot of rekeying of data,” Mendelovits says.
SuperCorp recently launched a service that creates corporate actions for its users so accountants don’t have to create them themselves. The corporate actions service costs $1 per fund per month.
SuperCorp has increased the number of banks that send data feeds to superMate. The cloud program integrates with SISS, Omni-Broker and Reward Super, with fully automated capture of any share trade in Australia. SuperCorp’s OmniCash feed covers 11 banks which represent 95 percent of funds administered.
“All transaction data from accounts at those banks is loaded into superMate, which automatically posts it away. Accountants will only have to handle exceptions,” Mendelovits says.
Other data feed services include electronic data from the Australian Stock Exchange, Macquarie Bank and eTrade, with prices ranging from 50 cents to $1.25 per fund per month. Users only pay the service fee for the funds that require feeds. An accountant might have 200 funds, 120 of which are with Macquarie Bank. The accountant might decide that 100 of the 120 have enough transactions to justify paying $6 a year per fund, Mendelovits says.
OmniCash, which covers 11 banks, costs $3 per fund per month.