Building Up: The Ultimate 6 Step Guide To Turning Your Accounting Practice Into a Fully Compliant SMSF Service Provider!
With over xxx Self Managed Super Funds being created last year It’s no secret the SMSF industry is booming right now. And where there is a booming market there also follows an influx of providers looking to service that market, with industry regulators keeping a very watchful eye on all protagonists.
Relatively low barriers of entry into the market creates a glut of service providers. This increased competition often leads to outlandish sales campaigns offering spurious benefits to customers as well as overly optimistic discounting, leading to confusion in the marketplace, with the accompanying increase in complaints to industry regulators.
In direct response to customer confusion and increased complaints regulators quickly join the fray, making sweeping regulatory changes with little notice in an effort to bring some stability and cohesion to the market.
1. Going The Hard Yards: The Art Of Getting In Top Quality Professional Staff To Do The Work
Whether it's hiring a graduate, an SMSF expert, or just an assistant to help you with the work, picking the right team member is vital to your long term success!
Choose a hiring strategy: Big or small practice?
To start off with, there’s a big difference in staffing strategy depending on whether or not you’re a larger accounting firm, or whether you just have a few staff. In general, bigger firms are going to be able to hire relatively unqualified staff to work on their SMSF accounts, as long as they have accredited and qualified staff doing oversight.
Also, many big firms find it very difficult to make money managing SMSF funds as costs are wildly varying depending on the skill levels of staff, and the complexities of the SMSF funds themselves. For this reason many larger firms outsource their SMSF administration and auditing to SMSF specialists as many of them offer fixed prices.
Smaller companies are a little trickier, both in finding great staff, and more importantly keeping new staff from jumping ship to start their own offshoot operation.
So let’s start off with SMSF staffing as it applies to bigger operations.
Firstly, while it’s important your staff member have sufficient SMSF knowledge to do the job, they don’t have to be SMSF qualified, and any bachelor of commerce will do.
That said, while technically anyone can do the work, the catch is the person signing off must be fully qualified. Also, as a note of warning, it pays to be careful here, as the person signing off is fully responsible for all work done, and it’s their reputation on the line. They’ll also cop the fines if something goes wrong, so the more experienced your new hire, the better!
So in practice your new candidate should have at least 3 years experience in accounting. You can grab a graduate accountant, just be prepared to do a tonne of training, and your internal checking systems are going to have to be excellent.
You’ll also need to have a senior accountant watch over to make sure everything is being done properly.
On the flipside, graduate accountants are a lot cheaper, so you’ll save a lot on staff overhead. That said, in many firms the only way a graduate accountant can get a pay rise is to jump ship, so be prepared to lose either them in the first 12 months after they’ve been trained, or expect to have to pay considerably more than when they started.
As a final note, your qualified staff are going to need maintain their professional status.
In order to do this they’ll need to attend workshops each year. There are a number of workshops being run around the country, just remember they have to be SMSF specific. Also, if they have multiple functions (tax, SMSF etc) they have to maintain professional development for both their tax license as well as specific SMSF professional development.
Most candidates don't want to pay for their own development, and costs can be up to $800 per day, which will give you around 7 development hours. If you look around you can find free online development webinars, which are often sponsored by law firms and other businesses who are trying to get an in to sell their services to your firm.
Now let’s take a look at smaller practices.
The smaller practice: Getting bang for the buck!
Firstly, the major difference is you’re almost certainly going to have to hire someone who is fully SMSF qualified and accredited. They’ll also need great knowledge of the superannuation law in general, and a solid grounding in SMSF management software.
The question you’re going to have to solve here is simple. In a high demand / low supply market for SMSF auditors, why are is a suitable candidate going to want to work for you as opposed to setting up their own shop?
This is going to be a key factor in staff retention, so you’ll want to have a think about this, and create a staffing strategy and remuneration package that solves this problem.
For the actual finding of candidates, there are two ways you can play it (excluding asking for referrals from friends/colleagues)
First is to put an ad in Seek. it’s a difficult game to play, as you’ll get a tonne of candidates, but once you get a bit forensic, quality is often questionable. Just be prepared to call a lot of references, and make sure you use objective criteria for shortlisting.
Whatever you do, don’t hire someone just because they lean forward and smile! (Believe it or not, statistically that’s the number 1 reason for hiring once a candidate gets to interview)
Second, LinkedIn is really starting to become a force in the recruitment market, although to get the best results I recommend getting a premium account which allows you much better searching facilities. This is especially useful if you’re looking to lure someone away from a bigger firm, as without LinkedIn they’d be almost impossible to fine.
Also remember, your SMSF operating procedures will be different to everybody else’s so regardless of their experience you should expect a decent training time before they get up to speed.
Also, if you do find a candidate who is fully qualified and accredited, just be careful they aren’t hoping to build their own SMSF practice.. you’re looking for someone who is specifically looking to work fulltime for an accounting firm for at least a couple of years.
Ask the question and make sure you’re satisfied with the answers.
Hiring is very expensive in terms of lost time and productivity, training, and advertising. If you’re going to go down that route, you’ve got to do it right!
Did You Know Smart SMSF Services Is Both A Fully Accredited SMSF Auditor As Well As Being A Chartered Accountant?
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2. The Real Deal: Getting Qualified As An SMSF Auditor
Getting into the SMSF Auditing business used to be easy.. but ASIC has gotten serious, and there are more hoops and expenses to be navigated than ever before.
Previously, all you needed to qualify as an SMSF auditor was to have a degree in accounting, and ideally membership with CA or CPA. However a rash of less than stellar management and auditing of SMSF saw the ATO and ASIC step in to tighten things up considerably.
That said, you still need to be a degree qualified accountant as the basic cost of entry. In addition to this, you now need to have completed any one of a number of courses endorsed by ASIC.
Thankfully, ASIC has created a page that give all of the relevant information on the qualifications you’ll need to become a fully qualified SMSF auditor:
3. Ticking The Boxes: Being Officially Registered With ASIC
The number of officially registered SMSF Auditors has dropped considerably over the last couple of years. Why? Because ASIC has made it harder than ever to make the cut.
Registering has become a little bit tricky over the last couple of years, although thankfully only really becomes an issue if you’re looking to become and SMSF auditor. ASIC clamped down hard on auditing in mid 2014, resulting in a lot of auditors being de-registered (according to the ATO approx 40% of all SMSF auditors have been deregistered since August 2014).
The main hurdle to leap is the education and experience hurdles. Getting the education is relatively straight-forward - you have to pass the exam. That said, it’s not an easy exam, but if you have the time and experience needed to be a successful auditor, then you should be fine.
We’re also assuming you have the basic qualifications you need.. if you’re not sure on this, go back and have another read of section 2!
More interesting is the “experience” side of things. The difficulty here is proving to ASIC that you have enough experience with SMSF to justify their decision to register you. If you don’t have at least 300 hours working on auditing either one of multiple SMSF under the direct supervision of a fully qualified and registered SMSF auditor then the going gets pretty tough.
You must have specific SMSF experience working with an accounting firm for a number of years before you will be considered for registration. To do this you’ll need a sponsorship letter from a manager or business owner who is prepared to vouch that you’ve done the required number of years in SMSF. If you don’t have a company that will vouch from you, you’ll need to get references from previous clients etc.
Again, best is if you get your information from the source, and you can find all of the latest details about registering on the ASIC site:
4. A Home To Play In: Building The Right Client Environment
Using Dropbox and email is a great place to start, but hugely inefficient, and prone to silly errors in handling. The solution is to build your very own client portal..
Sending documents back and forth by email works when you have just a few SMSF clients, but as your client list grows you’ll need to invest in a dedicated, and more importantly, secure online portal.
The idea here is that your clients will have a dedicated website they can go to check up on how their account is progressing, and where they can upload any documents you may need. This also makes life easier for you and your staff, and all documents you need are linked to the customer profile, and you can also track progress of work being done by your staff.
Dropbox is a good short term solution, but is not secure unless you shell out the big bucks for a business Teams subscription, at which point it becomes more economical to invest in your own portal.
And don’t underestimate the joys of having a central piece of software managing both document storage as well as process flow. As your client list grows it becomes more and more difficult to track progress for each client, and nothing screams unprofessional like having to call your customer back the next day because you’re not sure where their accounts are at. Clients expect you to have their information at your fingertips, and email just doesn’t cut it anymore.
Also, having a secure file management system becomes a great sales tool (as well as being best practice). Just letting someone know you have a dedicated client portal as well as secure online filing system gets you plenty of point in your future client’s mind.
If you can dedicate the time and money, and if your client list justifies it, I highly recommend you invest in a secure online client portal. You’ll never regret it!
Did You Know Smart SMSF Services Specialises In Helping Other Accounting Firms To Take Care Of Their SMSF Workload?
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"I found Vishal's work to always be highly accurate with excellent attention to detail, and all work is done quickly and efficiently. A great SMSF practitioner and accounting professional!"
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Fred Patten
"Vishal’s a great guy and a standout expert in all things SMSF from the administration of funds to auditing. He gives the right answers quickly and he treated our clients as if they were his own."
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5. The Backend: Which Administration Software To Choose?
As you start to get bigger, moving to a dedicated SMSF Administration package just makes sense. 100 page bank statements become a thing of the past.. it's all automatic!
As well as a dedicated client portal, you’re also going to want to invest in SMSF Administration software such as BGL Simple Fund, BGL360, Class Super, & Supermate. While it’s unavoidable that some paperwork will still need to be in pdf form, there are also plenty of ways to cut out paperwork by getting direct access to client bank account feeds.
Unfortunately, banks won’t just give this sort of access to anyone with a client portal, and you’ll need to fork out the cash to work with a vendor who is large enough to gain credence from client banking institutions.
The only downside with this kind of software is generally the price. In return for all of the time saving bank feed and administration features you’ll pay up to several hundred dollars per year per SMSF.
As an example, if you have a hundred SMSF clients that’ll mean a minimum of $10,000 per year subscriptions fees. This certainly qualifies as a non-trivial cost for online software!
You don’t really have much choice though, as most SMSF clients will simply expect you to have this online SMSF administration, and as trustees become more sophisticated and educated customers, this sort of utility becomes more like the cost of admission, rather than a time saving luxury.
6. Keeping Current: Qualifications Are Just The Beginning
Especially right now, the SMSF industry doesn't stand still, and ASIC isn't interested in the "I didn't know" defence. Big breech fines are in the near future for those who don't keep current.
For better or for worse, SMSF right now is a rapidly changing industry. What was a virtual wild-west industry is in the process of being completely revamped by a fed up ATO, with fines and penalties being introduced for more breaches than ever before!
As an example, recently the ATO made the decision that fines for breaches apply to each individual trustee, meaning that all fines have a potentially unlimited multiplier attached to them depending on how many trustees are in the SMSF.
To be specific, if the ATO decides that a fine of $10,800 is applicable for a breach, and the SMSF has 4 trustees, the actual fine becomes $10,800 x 4 trustees = $43,200. By any stretch this is a significant bit of information! (and one that has had SMSF accountants scrambling to advise their clients to make structural changes in order to limit exposure to fines.)
If you weren’t aware of these changes however, your clients would now be potentially significantly more at risk of liability to ATO fines as a result.
And this is not an isolated event. The ATO is constantly updating the guidelines and laws as they apply to SMSF and the potential ramification are often significant. To keep up to date, we recommend you subscribe to {insert paid subscription}, as well as keeping daily track of updates on the ASIC website {insert link to ASIC website for SMSF}.
Next Steps: Outsource Or Do The Deep Dive?
At the end of the day the same question seems to keep popping up.. Is there enough profit in SMSF to invest in infrastructure, staff, and the extra overheads?
Thanks to some serious ASIC and ATO intervention the SMSF industry has gone through a lot of changes, which has been both a good and bad things for auditors.
On the plus side, increased compliance and education requirements has resulted in a large number of auditors deciding it’s not economically viable for them to continue, meaning that demand for the auditors who are left has never been greater.
On the minus side, there is a reason all of those auditors dropped out.. having to retrain, get new qualifications and submit to ever more onerous compliance requirements, while at the same time keeping up with the ever changing requirements, can be a costly and time consuming exercise!
For accounting firms with large numbers of SMSF clients this is an easy decision, and your client base will largely make the decision for you. Things get a bit tricky, however, when you only have a few SMSF clients.
Either way, due to restrictions stating a third party must do the auditing for all SMSF, it’s a safe bet you’re going to be looking for a fully qualified SMSF auditor with an established practice and a verifiable track record of great service and top quality compliance.
If this is the case, then give us a bell, or email info@smartsmsfservices.com.au and we can have a chat about how we can help you give your clients top quality SMSF services.
In the meantime, for the rest of you, if you’d like to hook up with other accountants who are also going through the process of building up a thriving practice, or continuing to grow a large one, join us on the Accountants Australia LinkedIn Group