Gone are the days of accounting professionals spending hours buried in excel spreadsheets.
Instead, the profound expansion of software and technology means accountants have come blinking into the sun and now spend the lion’s share of their time managing client relationships and not just crunching numbers.
Understanding and managing the complex needs of clients now sits alongside the timely delivery of tax effective outcomes using up-to-date data as the essential purpose of the accounting professional, according to Angelique Faes, senior SME analyst at Class.
“The world has become more complex, and the policies around how people manage their wealth have become more complex as well,” Faes says.
“A traditional shoe-box accountant would struggle to know what the earnings and expenses of their client were until they got to preparing the end of year tax return, but clients have been looking for a more proactive and engaged relationships to help manage their affairs in real time.”
The always changing policy landscape has further enshrined the value of client focused advisers able to adapt their approach to get the best outcome, both within and outside of superannuation savings.
The government’s tinkering with the tax rules since 2016 has blunted the effectiveness of the superannuation savings vehicle for individuals, pushing accountants who advise clients on self-managed superannuation funds to think more broadly about investment vehicles.
In particular, cuts to both concessional and non-concessional contribution caps, and other areas including transfer limits have made it harder for clients to accumulate assets in super and manage their wealth tax effectively.
“These changes in the super space are pretty considerable, however super is still the first port of call when it comes to accumulating wealth because of its tax advantages,” Faes says.
“It’s become less tax effective to put assets that take you over the transfer balance cap in super and so that’s why wealthier clients are looking for alternatives where they can invest their money.”
Trusts as an alternative
Faes says trusts are becoming more popular given their flexibility and advantageous tax environments, and often have fewer restrictions and rules compared to superannuation accounts.
Trusts allow families to access favourable taxation treatment by ensuring all family members use their income tax-free thresholds and lower marginal tax rates. But trusts must distribute their profit to beneficiaries annually to avoid earnings being taxed at the highest marginal tax rate, meaning there is an ongoing operational component.
“Strategically, it can be a really good outcome for the client,” Faes says. “But financial advisers and accountants for these trusts didn’t really have much technology support.”
This is where the big themes of advances in automation via technology and demand for ongoing proactive relationships all came together for Faes and the team at Class.
“Accountants were spending a lot of time finding information, entering that information and reconciling information, which is a lot of administrative work and can introduce errors,” Faes says. “So we expanded our cloud-based administration system with automations that help them reduce manual labour.”
Automating capital gains calculations, corporate actions and income streaming meant Class’s Trust software could help with managing some of these tedious tasks and free up accountants to be proactive with clients.
“It’s a whole new relationship opportunity that means they can be ahead of the game and give clients advice at critical times, rather than wait for those few moments a year when they meet,” Faes says.
The great intergenerational wealth transfer – estimated to represent $3.5 trillion from the baby boomer generation to their beneficiaries over the next 20 years according to consulting business BDO Australia – will ensure estate planning is front and centre for accountants in the next couple of decades, Faes points out.
As estate planning continues to grow in importance in the conversation with clients, the trust structure will continue to gather steam as families look to investment trusts as they consider how to manage their wealth tax effectively.
“It can be quite complex for an accountant to assist the trustees make an informed decision about the distribution and often they may need to prepare interim accounts, to understand what the earnings and expenses were during the year,” Faes says. “Or they call up the client and ask, ‘have you sold anything this year? Did you buy anything?’ That kind of process doesn’t always lead to the best results.”
Findex, a financial advice and accounting network operating across Australia and New Zealand, found this manual process of managing trusts quite cumbersome for both clients and staff.
“We were using a number of spreadsheets to calculate and record investment holdings within a trust,” Timothy Kyriazis, client experience manager at Findex, says, adding financial statements were prepared by a manual desktop accounting system.
Scalability is key
Findex, which specialises in managing large scale family offices, found the unwieldy spreadsheets presented roadblocks for the business as it tried to scale.
“Not only was it inefficient, we were unable to hand over tasks to new starters as all the knowledge was held by the accountant working on the job for years,” Kyriazis says. “No value was shown to the client as reports were provided at cost and were only prepared for compliance reasons.”
Adopting Class Trust into Findex’s processes gave the accountants and financial planners unprecedented efficiency, Kyriazis describes.
Quickly, the team found they could hand over tasks and were confident that all items, such as income and capital gains, would be captured and that prior year processing rules would be carried over so that, if required, new staff could easily takeover the job and the same standard would be maintained. They also found they could develop and produce reports quickly for clients and actually spend time talking about decision-making and goal setting.
“Class Trust enabled our senior team to focus on the client and add value, rather than only working on the day-to-day compliance,” Kyriazis says.
Leveraging technology to focus on client relationships also gives accountants and financial planners the opportunity to grow their own businesses as the Findex example shows.
“If they wanted to grow their revenue they probably needed to get more staff in and then attract more resources,” Faes says.
“But with technology, as long as it’s applied correctly there’s a real opportunity to provide a scalable service that’s good quality and offers great value for the client.”
The team behind the Class Trust innovation decided the onslaught of spreadsheets needed to stop and firmed up their objective: if you can do it on a spreadsheet, our software will be able to do it.
“Cloud technology really came into its own during the pandemic,” Faes says. “It’s allowed accountants and advisers to work together, and all of that data to be shared between them in a single source of truth.”
As policies shift in the tax and the superannuation systems, staying on top of the changes is one thing but interpreting them and applying them to individual cases is quite another.
Cognitive thinking, rather than mechanical data input, is giving firms a powerful edge in the competitive wealth management space.
“Helping people understand and build their wealth is generally why people get into this industry to begin with,” Faes says.
“So anything that can help them to do their job better and connect with people is going to pay out well, for everyone involved.”