Episode 32 – My key takeaways from the 2018 SMSF Association National Conference

Hey there, folks. Aaron Dunn here and welcome to the Smarter SMSF Podcast where we take a look at some of the latest issues, strategies, and insights impacting the SMSF sector. The last week has been a busy one that’s why we didn’t put out a podcast. We were away in Sydney at the SMSF Association’s 2018 National Conference where there were around 1630 attendees at the International Convention Centre (ICC). It was a huge event as is always the case and gave us an opportunity for the first time to showcase our rebranded SMSF Academy into Smarter SMSF. So, for those of you that came and saw us at our stand, thank you. Hopefully, we were able to demonstrate some of the fantastic tools we’ve been building, documents and training that we have available. For those of you that attended my session, an even bigger thank you because it was a very fun experience working alongside two of my peers that I hold in high regard for in Adam Goldstein and David Busoli, but I’ll get to that shortly.

The SMSF Association National Conference is really one of the premiere highlights for me on the business calendar every year, and I do consider myself quite fortunate that I think it was for the sixth year in a row now that I’ve presented at this conference to my peers. Interestingly though, and only upon reflection having a drink on the Thursday evening with a couple of people, it’s the sixth time again that I actually haven’t spoken on a pure technical topic at a conference that is known for its high technical specialisation on SMSF issues. It’s quite interesting in itself that I do get asked regularly to talk about more practice-based issues, so issues confronting practitioners with the super reforms and I guess observing what’s happening and what’s coming forward in the sector, and maybe I’m fortunate in so far that there are very few that can talk in that space rather than just technically.

But whatever the case, it is a lot of fun. It can be quite challenging, but certainly it was something this year when we spoke about thriving or surviving, how you need to adjust your SMSF business model, I had a lot of fun talking about that and understanding the characteristics to those that attended around what is it that is setting up a business today to thrive post super reforms compared to those that are just struggling and not surviving very well as they navigate through CGT relief, total superannuation balances, [TBAR reporting and much, much more. Because the business of SMSF here has many moving parts and really that’s what we wanted to flesh out, how you navigate around these is going to be really important in modern practices today whether it’s accounting, financial planning or the like. So, we will look at maybe talking about that at some stage in the future and if I can get the opportunity to bring Adam and David in or even some of our other members to talk about that, we’ll certainly do so in some webinar training and/or podcast.

But what I thought I’d talk about today was some of the key takeaways for me from this particular conference. The first one actually came out of the session that we did on the surviving or thriving under the super reforms. It was a comment that Adam Goldstein made in this session along with the unrestrained David Busoli from SMSF Alliance, but what Adam mentioned through his business at Skeggs Goldstien was this real shift in a view that we ultimately have been observing over a long period of time. Compliance has been something that has become very much back of mind rather than front of mind, and what I mean by that is that through technology and through the way in which things are trying to be streamlined and so forth, it’s being pushed further back, trying to be standardised and not having any high levels of engagement with clients. And we’re seeing more and more globalisation of the workforce, stuff being pushed offshore, very high levels of pressure around price sensitivity and the like, but Adam made a very pertinent comment in that particular session.

The comment was that compliance in their eyes is the new strategy. And what Adam was effectively saying here as he shared insights into how their business has worked through the super reforms, this powerful message really talked about how they’ve brought the compliance right into the front of office. And whilst many of us like I said before have seen this task as a back office process adding limited value, they have taken a very polar opposite view.

Now they’ve gone through a process of adopting the cloud technology. They have regular engagement as a financial planning and accounting business, but now that they’ve taken onboard that technology, they see the regular administration of their funds as a critical tool in the ongoing discussions for their quarterly meetings because like I said, with that financial planning context that they not only are discussing things like their quarterly reviews, the investment strategy, but this is providing them with the ability to touch on all of the critical issues that are relevant to them (clients). They use the Class Super software inside their practice to actually get in front of the client and show them the information that’s in there around their contribution caps, how they’re tracking for things like total superannuation balances in the future, their pension levels, and the like.

And it’s through this process that it’s ultimately allowed Adam to demonstrate the actual value of this compliance-based work and create an annuatised pricing model that enables them to build a far more profitable business.
It is this change of view that to me was quite compelling because like I said, we’ve seen a very different approach over the last few years where that administration or compliance function has just been very much part and parcel of a process, a year end process trying to drop it down to a lowest common denominator. Where he’s saying if we bring this to the front and use it as an engagement piece with our trustees, because we know that engagement and trustees understanding those compliance obligations are part and parcel of their duties as trustees. And we’re now seeing with the tools that we have available within our industry, we are very fortunate here in our industry to have software providers in Australia that are at the forefront of technology that is impowering us as practitioners and businesses of all sizes to better engage with our clients, and that’s very much what they’re doing.

And it’s where we see this and where we observe this, what they’re really seeing this level playing field for practitioners against the larger sized corporations as well working within the space because in essence, they’re all using this same software. There might be some proprietary software in the business, but in essence, we’re not seeing anything bespoke that is giving large organisations substantial scale and effectiveness that would put them ahead of what a practitioner of a smaller size could actually do. So sure, scale is going to bring its benefits, but much of that in the larger space is driven on a return of equity through the globalisation that they see in its workforce.

So I think it’s pertinent to remember here and leverage this opportunity because we can use the tools that are readily available to us and leverage this opportunity as a practitioner to remain relevant in the eyes of our client because that’s what we ultimately want to do is manage that relationship as we trek through the reforms, but using the power of the software and making sure we switch it around, the compliance is really at the forefront of the conversations that we’re having with our clients to not only enable them to understand the responsibilities, but actually drive strategy in conversation that we have with them as well.

The other thing that was quite obvious from the conference as we were now 12 months beyond when these changes first came about and we spoke about it at the 2017 national conference is you just got a sense that as an audience, they were far more prepared around what was happening with the reforms. In essence, progress had been made, but in reality, there were still many unresolved issues and I guess you could call it there’s still a lot of mess to be cleaned up. As I said, 12 months ago, we kind of felt like a bit like ‘deer in headlights’ with the 1 July 2017 date fast approaching and just a hell of a lot of work that needs to be worked through, that sheer volume of change and implementation was quite significant and remains quite significant.

I guess at this conference what I observed was there appeared like I said to be a far greater level of understanding, which was good, which is really good and as expected, and a real focus on the leveraging those key touchpoints, the strategies, taking a far more lateral approach to how we’re going to be dealing with things, whereas last year, it did feel far more linear in understanding and really chiselling into our minds how the rules were actually working, taking a straight line view from the regulations explanatory memorandum and so forth.

This year we started to explore far more the issues of the back of estate planning, the issues around transition to retirement, the issues around contributions and much, much more. However, what was apparent is there are still many sessions as we work through that there continued to be examples of unresolved matters or issues where we needed more guidance or clarity from the regulator. An example was I know with the TRIS, which Tim Miller spoke about on Day 1, was we did have situations where literally two days before the conference, we’re seeing Treasury come out and finally, look to amend the regulations around reversionary (pensions) and death benefits where that individual was in receipt of a transition to a time in income stream. We have further issues around total superannuation balances, with LRBAs. We had questions that are unresolved and needed some clarity, I know Graeme Colley’s session around CGT relief was just but one other matter as well.

So it’s these things that we really need to get further and further and further in, and I know everyone is working at a rapid rate, but it’s these types of things that we need to make sure as an industry we continue to push forward and make sure that the regulators and the policymakers provide us with that further guidance and change where necessary and in a timely manner.

Whilst on the topic of Regulator, the other one that I thought was quite interesting was around the transfer balance account reporting and whilst it’s good to hear from the Regulator regarding an update on the transfer balance account reporting requirements, I do hold some fear as to the ATO’s current views.  Now the reason why I say this is that Kasey MacFarlane (Assistant Commissioner) in a session set out I guess what you’d call the ATO’s aspirations of the ATO for SMSFs as we move into a more digitised approach, and that certainly is something that should be highly commended as we move through from what at the moment is a very simplistic approach to dealing with transfer balance account reporting.

However, what concerned me was that in the same breath there was comments made about the fact that the ATO do not envisage any future change to the transfer balance account report concessions for SMSFs. So to me, whilst it provides a level of certainty to the SMSF sector around that reporting timeframe, it gives me a sense though that the scope is so broad here that by trying to cater for everyone, that they’re not actually really catering well for anyone. What I mean by that is that we end up in a situation where we had this aspirational (ATO) approach that was spoken about inside the session, but by the same token, really saying, “Well, no, nothing’s going to change.” How do we as a profession look to and support the aspirations of a more digitised approach (by the ATO) if there’s at the same time a comment made that in essence nothing’s going to change in the future? And that’s the bit that I found quite confusing in the messaging there.

I guess don’t get me wrong here… the carve out from the first of July 2018 is a great result, is a great result because the total superannuation balance, the $1 million threshold is going to reduce the level of reporting by about 85% according to the ATO and information that process of negotiation took out. However, in line with what was mentioned as being aspirational for the ATO, in my view, I think it would’ve been much better for the (Assistant) Commissioner to actually talk about I guess the revision of this process in say four or five or whatever years’ time, rather than saying as a blanket ban, “Look, we don’t intend on changing this in the future.”
And I know Peter Hogan (SMSF Association) who was chairing the session spoke to her about whether this was going to be looked at in the future and it was clear that there was the intention was that there’s going to be no reference to that at any … to give that level of certainty. And whilst that is understood that that’s the case and it’s there to provide the certainty, in my view, it would’ve been much better to talk about this and say look, for right now, the systems and the way in which we’re going to implement, we’re not going to be changing this in any way, shape or form in the foreseeable future. But as an aspirational approach, I think what is important that should’ve been said is that we’re going to consult with industry and we’re going to try and understand just what level and impact technology is going to play in the future of the sector and what role it could actually play around transfer balance account reporting as well for the sector.

Because to me, when we think about the cloud technology, the fact that we’re more than a third of all funds now inside the SMSF sector is using (cloud-based) technology, we could be looking at things like blockchain having influence in the future. All these sorts of things are going to substantially influence the way in which our funds are operated in the future. I would suspect that we’re going to see at least half of all funds within the next five years would be on cloud (based software) even going beyond that.

Therefore, if we take into account the ATO’s digital focus, its engagement with the SMSF Association think tank that was announced at the SMSF conference is a new initiative, when we talk about the software providers and the advancements that they’re doing in the technology space, and other key stakeholders, I guess what I found disappointing, what I would’ve liked to have seen is that we would’ve hoped that the industry will be far more progressive in its approach to its TBAR functionality at that point of view so therefore, let’s revisit it. Let’s openly say, “We’re going to revisit it,” but we’re not going to change it until we’re comfortable that the sector has progressed to an extent that it would be able to cope with such a change.

And that was the thing for me where I think rather than simply stating that it’s a permanent arrangement in my view is going to line up the ATO at some point in the future to a greater level of pushback rather than if it wanted to align itself closer to APRA regulated funds rather than saying, “Look, we will be revisiting this at some point, but we’re openly going to consult with stakeholders within the sector until everyone is comfortable that we work to a framework that is a far more regular reporting process, but has the technology and tools to enable us to do so.”  Like I said, it really piqued my interest in that conversation so we do have this commitment from the ATO that nothing’s going to change, but we have this aspirational approach, which appears inconsistent with that current view.

I’ll watch on with keen interest with the think tank initiative that the SMSF Association spoke about and raised, John Maroney (CEO, SMSF Association) spoke about initially at the conference. It’ll enable the industry for the first time to get real insights into the sector. I think for too long we’ve relied on the ATO statistical summary, which whilst it is highly valuable in what it does, it doesn’t really drill down and give us a true reflection of the activities throughout the year of a fund. With big data coming in from BGL, Class and Heffron and the like as part of this initiative, it’s going to allow us to understand significant patterns in trustee, in member behaviour, the way in which contributions come in, benefit payments come out, and much, much more to help the sector better advocate for its members and ultimately, retirement outcomes through self-managed super funds.

For that, I think that initiative could be a real game changer in the sector as well. And hopefully, I’ll take the opportunity in the not too distant future, if you’re listening, John Maroney, I’d love to have or Deborah Ralston who’s the new SMSF Association chair, I’d love to have a future conversation with you around just really what some of those initiatives will be in the SMSF Association’s think tank.

The theme in this year’s conference was Beyond… to look beyond today and to think about the future and for me, beyond provides significant opportunities for a practitioner working within the SMSF space, but as I said in my presentation, it comes with a preparedness to change, to learn, and to continue to grow. And for those that do, I certainly believe that there are prosperous times ahead. If you went to the SMSF conference, I’d love to hear some of your key insights, what you thought was great as well.

Thank you for listening to this week’s SMSF podcast and I look forward to you joining me next week. Take care and bye for now.