BMR Corporate Solutions senior consultant Mark Ratcliff was drawn to SMSFs because of their complexity. He speaks to Darin Tyson-Chan about the impact of technology on document provision and his concern over the ever-falling prices of service providers.
How did you come to be a part of the SMSF sector?
It happened by accident really. I was working for a firm called Walter Turnbull down in Canberra, when I realised the area of tax advisory was not my forte. So I moved to Dixon Advisory in 2005 when everything got fun and busy in the SMSF space. I worked there for a couple of years and then moved to Sydney. It was a steep learning curve for me, but I found it fun and I loved every bit of the experience, so here I am 10 years later still having a go at it.
What was the thing that really attracted you to the space?
I liked the complexity of SMSFs and the fact the sector was so young. The tax planning opportunities on offer were exciting as was the ability to see SMSFs morph into what they’ve become now. They’re applicable for a lot of people and to see the benefit individuals get from them in retirement after years of hard work is really attractive to me.
You’ve moved from the fields of accounting and tax and are now involved in providing legal documents. How are you finding that?
It’s been really cool. BMR Corporate Solutions is four years young now, which is a feat in itself. Document generation is a system we saw other firms producing and we looked at them and thought we could do better. We’ve been very, very slow to market because we want to make sure we were doing everything right, given it’s an IT project and it’s never going to be a 100 per cent correct. But we’ve worked really hard and our confidence now is sky high. We’ve now got the ability to be involved in a lot of integrations happening in the market. We were one of the first firms to perform the Macquarie Cash Management Account integration, and the ABN (Australian business number) and TFN (tax file number) automation process there is something that works so well. We can also now facilitate Australian Securities and Investments Commission integration with company lodgement and business name registration and all those sorts of things.
How competitive is being a provider of legal documents?
Very competitive. There are two types of document provision businesses. One is the traditional business that has a big following, is consistent and has been servicing the same clients for a significant period of time. Their clients are conservative, like accountants, who hate change and have enjoyed the same processes for a number of years. The other type of business is reliant on technology and improving the way things have been done in the past. We operate on the technology side and perhaps the biggest problem we encounter is with the end users. We try to make the system as robust and foolproof as we can, but there’s always someone who loves to press buttons or put the wrong thing in the wrong box. But we want to make sure if there is something we can do better, we do it.
Will there be a time when technological improvements will be exhausted or insignificant in the value they can add?
Yes, but I think there are still significantly massive gains to be made from technology because there are so many latecomers to the party. We’ve been lucky to have been dealing with organisations like BGL, Class Super, and Xero because it means we’re interacting with people who understand what the cloud is and know what a fund establishment deed does and how bundling these things together can be advantageous. In terms of process speed, we’re already having to decide whether we go from something that takes 20 seconds to complete to something that takes 15 seconds to complete. In most cases if the process is already really fast, we’d probably decide not to do it. I think the efficiency is a wonderful thing, but for super fund administrators volume plays a big part as well.
How much fine-tuning is needed to SMSF documents and how often is it required?
As things change we have an informal review once a month, just over the phone, and a formal review every three months. We had a change recently with the QROPS (Qualifying Recognised Overseas Pension Scheme) and the English pensions as they came over. We added those in. For us it takes probably between 10 minutes and half a day to make those updates, depending on the complexity of the change. If you purchase one of our deeds and a change has to be made within the first 12 months, we explain to the client what’s changed and why it has changed. The QROPS adjustment won’t affect too many funds, we know there are particular advisers or accounting firms who have clients that are English or have come from over there, but we want to make sure they’re covered.
Do you have an official capacity with the SMSF Association’s Sydney chapter?
I’m one of the committee members. I’ve been a part of the association for many years now through the specialist adviser designation. It’s something I’ve really enjoyed, particularly the opportunity it has allowed me to meet new people. It’s been great to be involved.
How did the chance to be a committee member come about?
Originally I was approached by the chapter to see if I wanted to be the secretary and I said not really. So then they asked if I wanted to be a committee member and I said that would be fine. I just really wanted to help out and I feel I’ve been really lucky to work with Tim Mackay, Adam Goldstein and Anna Wong, who are really wonderful people in the industry. We have regular presentations to members and that kind of thing is really exciting for me because I get to meet the presenters. My role isn’t too difficult as it involves chasing up the presentation slides and making sure the presenters from interstate get what they need the night before. That’s all good fun, getting to hang out with those people.
Would you ever consider being involved with the association at a national level?
Possibly, but it comes down to our capacity at the moment. If the opportunity comes around, I’d be absolutely happy to chat to anyone about it. I do a little bit of work with Chartered Accountants Australia and New Zealand as well, which is also good fun. It’s a small practitioners’ discussion group and they’ve been meeting since 1981. It’s comprised of around 15 to 20 guys who meet once a month. The average age is 60 or 65 and it’s a wonderful experience as they’re people you can count on. I know I can always ask for their help if I need it and if they can’t help, they’ll usually be able to recommend someone who can. It’s all about expanding your networks.
What would you say is the most telling change you’ve seen in the sector?
The number of self-proclaimed experts who have emerged in the sector is one of the big changes. Also, the automation of SMSF administration has been a big change and Class Super and BGL are fighting neck and neck to claim that prize. It’s actually been a very interesting process to watch. Finally, the growth of the sector has been another significant change.
What would be the one thing you’d change about the SMSF space?
I don’t think it’s too bad. I’d like to see more certainty around the rules governing SMSFs and super, but that’s governments for you. They’re testing the water on everything to see what’ll get them into the least trouble. The one thing I wouldn’t change is the ability to use borrowings in an SMSF. It’s a wonderful, wonderful tax opportunity if it’s being done for the right reasons, for the right person at the right age, and with the right loan-to-valuation ratio. If all of those boxes are ticked, then it’s a really good thing. The rest I think is okay. I suppose I’d like to see the supervisory levy go down a bit because it’s been a bit aggressive in the last couple of years.
What’s the biggest challenge facing SMSFs over the next 12 months?
The race to the bottom among service providers. Who’s going to come out with the craziest lowest price and actually do a good job? If you’re building now for funds to be serviced onshore as cheap as offshore, it is a big challenge. So in the next 12 months prices will come down to a point where I think it’ll be too cheap. If the client has a relatively simple SMSF, you can probably service it for $1000, but you’ve got to be cautious there as a provider if you’re paying for your software, paying for your audits, paying for your rent, and you’re paying for your staff. If people don’t want to make money in business, then thanks for being so generous with the low costs and I think that’s the crux of what’s going to happen there.