Where is technology for SMSFs headed?

To start with, the advances in technology and data collection have the potential to assist in the administration of SMSFs on platforms via automated data filling or information transfers.

Founder and managing director of SMSF platform BGL, Ron Lesh, says there is potential for artificial intelligence (AI) to help with processing and attaching relevant documents to relevant transactions within a fund. BGL is also using AI in their reviews of funds to notify trustees and administrators that everything has been posted in the correct place.

But not all platforms are using AI and time and effort is required to train the AI to be able to handle these functions appropriately.

“[The AI] still has to be trained on types of documents. We’re training it and we’re at a point now where you can have a document type and it takes about ten of those documents to train it,” Lesh says.

As the technology is still new and expensive there are yet to be any real cost savings for trustees. The main benefit for SMSF trustees of more automation in their SMSF’s administration via AI assistance is transparency.

“It’s going to mean they’ve got more information available more quickly. They can see where their fund is at any point in time,” Lesh says.

Streamlined accounting and auditing

AI also has the potential to help in the accounting process by prefilling tax return data at the end of the year.

“We want to get to this point where you do very little work to produce the tax return,” Lesh says.

And for auditors, AI may be able to be used in the future to determine whether an SMSF complies with the Superannuation Industry (Supervision) Act and flag any potential contraventions for further investigation by the auditor.

Open banking – which gives consumers the ability to share their banking data with third parties – also has the potential to make administration of SMSFs easier if it extends to super.

Chemay says that if open banking were to lead to open super, and banks and super funds were able to exchange data, it could reduce the need for funds to ask questions around such things as the financial status of members.

“If you could have connections between the super fund trustee and the bank and then you could just pull the monthly transaction report and go oh, yeah, it’s obvious they’ve got a mortgage,” Chemay says.

Unfortunately, with open banking still in its early days in Australia, open super is probably a long way off.

The democratisation of investing

The area where there may be the most immediate time and cost savings due to technology may be in investments and robo advice.

Due to their scale, robo-advice platforms can offer investment portfolio options at very low fees and investors and SMSF trustees can invest in them directly, without using an advisor.

“Out of all of those three [administration, auditing and investment], I think the one I can see the most development occurring is actually the investment space, just because all these fintechs are trying to connect with end users directly,” Chemay says.

What is robo advice?

Robo advice, or the automation of financial advice, has advanced in leaps and bounds over the past decade and there are now many organisations operating in this space.

Most platforms involve the investor providing financial details about themselves, their financial situation and their attitude to risk. The robo-advisor platform then suggests a portfolio of investments.

Robo-advice platforms mostly use a combination of exchange traded funds but some include actively managed funds. Portfolios can be generated completely automatically or with some human intervention. 

Last year, Rainmaker Information forecast the potential for a $60 billion robo-advice market in Australia, based on similar data for the US.

“Robo advice is becoming an increasingly attractive proposition in Australia as it’s a very cost-effective way for retail investors to obtain limited financial advice and be connected with packaged investment solutions,” says Alex Dunnin, executive director of research and compliance at Rainmaker Information.

Some of the larger providers include Six Park, Stockspot, Raiz Invest, InvestSMART and OpenInvest.

Andrew Varlamos is cofounder and chief executive officer of OpenInvest, which offers the ability to invest in a portfolio managed by professional fund managers.

“You can’t obtain, in a cost-effective way, a portfolio managed for you by a brand like JP Morgan, BlackRock or Schroders. You need an advisor to access their intellectual properties and make changes and the advisor has got to go through regulatory documentation. The technology means you can scale all of that intellectual property and deliver it for a low fee to an unlimited number of people,” Varlamos says.

By assigning the majority of their portfolio management to professional fund managers, there is also the potential for SMSF trustees to achieve superior investment performance, although it’s always important to benchmark returns after fees and taxes.

The future world

Technology has made it easier for SMSFs to monitor and track their investments and, in some instances, has made the basic administration of an SMSF more low touch.

At some point in the not-too-distant future, more administration tasks will be fully automated, super funds will probably be able to extract data from bank accounts after obtaining customer and member permissions, and auditing and accounting processes are likely to become a lot faster, and eventually cheaper.

But for now, most of the cost benefits and time savings of technology for SMSF trustees lie in the cheaper investment fees available via some fintech platforms, which can offer a wider choice of investments and investment expertise at a lower cost due to scale.