How close are we to ‘zero-touch’ SMSF administration? (Part 2)

02 June 2015 / By Kris Kitto
In Part 1 of this article series we focussed on the technology currently available to SMSF accountants and administrators. Specifically we looked at what data can be pulled into an SMSF accounting platform like Class Super, as well as what we can do with that data once it's inside the accounting system.  We now turn our focus to the future, and the likely innovations that will force us to change our approach to SMSF services as we move towards zero-touch SMSF administration.

Working with the data

The current ‘if this then that’ style of automatic treatment of accounting transactions is logical and relatively simple to understand – for example “if the bank statement line contains the text string ‘Pension – John’ the code transaction as a pension payment to John”.

However any experienced accountant knows that a larger portion of their time is dedicated to the identification and treatment of exceptions – events and transactions that don’t fit the mould, and therefore cannot be dealt with via logical ‘if this then that’ rules. An accountant needs to apply their knowledge and history of the client, as well as their professional intuition to provide direction on the event.

So this second level of accounting automation is more akin to artificial intelligence than straightforward and logical decision making – and this is the core of what I define ‘robo-accounting’ – complex algorithms that will replicate the functions performed by a human accountant.

Although the concept of 100% automated ‘robo-accounts’ may seem far-fetched, I believe it’s already starting to creep up on our industry.  Once the amount of data available to SMSF administration platform providers - such as Class Super - reaches critical mass, it’s not hard to envision software code that analyses and mines the data from tens of thousands of super funds and combines it with the specific history of an individual fund to eliminate any exceptions that a human accountant needs to deal with.

Even when it is not possible for any accountant – human or robot – to clear exception transactions, I foresee that in the not too distant future an accounting platform may automatically email the trustees to seek additional information required to process a transaction.

Getting information out

Once all the data is crunched, accounting information in the form of financial and member statements together with an SMSF annual return can be generated and pushed out to external parties such as the trustees, members, auditor, adviser and the ATO.

Although typically the majority of compliance related activities are handled on an annual basis, both SMSF trustees and advisers are increasingly demanding up to date fund information concerning investments, contributions and pensions to ensure better advice and decision making. This is where cloud based platforms with robust, integration friendly APIs come into play.

The opportunities to leverage the information available within an SMSF administration platform are virtually endless – both on a personalised level, but also on a macro level to detect and report the investment trends of SMSF trustees.

So when will 'zero touch' SMSF accounting become reality?

I would define ‘zero touch’ SMSF accounts as a fully reconciled, 100% accurate set of accounts that have been prepared without any manual human intervention. Based on current technology, I estimate that in just over two years in 2017 we will start seeing the first such ‘zero touch’ accounts rolling though SMSF administration businesses like ours.

Currently virtually all the ingredients are there. One of the key things missing is the ability to automate current confirmation and matching processes that still rely on humans to ‘click to confirm’ the treatment of transactions (both at an individual fund and also at a macro level). Once this functionality is built into the leading SMSF administration platforms, we will be able to prepare annual SMSF accounts with no human intervention. Initially ‘zero touch’ will only be applicable to the very simple SMSFs – say those with simple listed investment portfolios and members that are either in accumulation or 100% pension. Overtime as the amount and accuracy of data improves, increasingly more and more SMSFs will be just be processed automatically. I don’t believe this will lead to the demise of traditional accountants at the same time however. There will still be the need for quality control checks, system oversight, independent audits and most importantly the provision of advice to SMSF trustees. Whether this ultra-automation happens in 2017 or 2027 is irrelevant. Technology is quickly shaping the SMSF industry and is impacting all participants. These changes although potentially disturbing cannot and should not be shied away from as each change creates opportunity.

I will leave you with one of my favourite quotes (attributable to Charles Darwin although it is someone else paraphrasing his words), which I think best sums up how we need to approach these momentous changes that we are facing:

“It is not the strongest of the species that survives, nor the most intelligent. It is the one that is the most adaptable to change.” - Charles Darwin

Kris Kitto
About The Author

Kris Kitto

Kris Kitto - Director at Superfund Wholesale. I really enjoy the opportunity to collaborate with other professionals, especially those who are pushing some boundaries and delivering their services in a new and fresh way. I truly believe that for us to move our industry forward, we need to focus on what COULD BE rather just accepting what we have in the present. That ideal of not being constrained by history, and looking to the future, is a big part of what I bring into our business and also the businesses of professionals I work with. Follow me on Twitter