Tuesday 01 July 2014
SMSFs: a rapidly evolving industry
Tuesday 01 July 2014
The 2014 SMSF Service Model Report from Macquarie and the Self Managed Super Fund Association (then the SMSF Professionals' Association of Australia - SPAA) looked into the wide variety of businesses that service self managed super funds (SMSFs) and their business models.
The report revealed a large, flourishing and enormously diverse industry, with no single business model dominating, and highlighted industry best practice and uncovered the key drivers of sustainable outperformance.
Amid the diversity, a number of key themes have emerged, with important lessons for SMSF businesses seeking to achieve sustainable outperformance:
- The industry is characterised by small, often specialised practices, with 62% of businesses servicing fewer than 100 SMSFs. Nonetheless, a small number of firms have taken advantage of economies of scale to achieve above-average profitability, using technological and process automation to drive greater business efficiencies and increase margins.
- As a result, there is significant potential for industry consolidation, with many businesses seeking growth through acquisition. Yet acquisitions remain challenging in a market where buying intentions far outweigh selling intentions, suggesting that business owners need to carefully analyse and actively pursue potential opportunities while they still exist.
- While some businesses prefer to focus on a particular specialisation, others have sought to grow through diversification of their service offering. That has seen a trend towards convergence, with accounting practices adding financial planning expertise to their businesses and vice versa. Nonetheless, the origins of each business still tend to shape the principals' worldview and their approach to operations, client acquisition and growth, sometimes imposing attitudinal barriers that need to be overcome if the business is to expand into new areas.
- For most businesses, networking and referrals remain the key to client acquisition. Yet while personal recommendations are enormously valuable, there is also evidence that other, less widely used acquisition techniques can help to deliver exceptional growth.
Given the clear link between scale and profitability the report uncovers, growth is likely to be accompanied by continued industry consolidation. By building volumes and creating a broader and more varied service offering, not only can you realise new efficiencies, you can also capture a larger share of your clients' business, driving higher revenues and profits.