We are seeing a surge in Australian financial services firms outsourcing a large proportion of its operations to offshore providers. While it may be legal, many clients are oblivious to this practice as disclosure is buried in the fine print of the engagement letter.
I encourage financial advisers and accountants to rethink their strategy and look at competitive local options that offer smart initiatives and efficiencies.
An Australian-based adviser and SMSF partner is simply easier to work with – there are no issues with time zones, language barriers or having your instructions misinterpreted. Despite the remarkable power of cloud technology, on the flipside data is potentially more vulnerable with a higher likelihood of security breaches.
It cannot be denied that outsourcing offshore is significantly more complex compared to a business with all data stored locally. Having the entirety of a client’s SMSF work conducted in Australia is more efficient when it comes to delivery, producing better results with less friction.
There are three key reasons why advisers need to keep clients’ private financial data onshore:
1. Innovation
To ensure fees remain competitive, innovation is important and using technology as an innovation-enabler rather than cheap labour sent offshore is key. Providers are driven to look for ways of leveraging smaller, higher cost teams and build more scalable systems that are not primarily dependent on a large pool of low wage workers. Advisers can partner with technology providers to go head-to-head in creating smarter initiatives and efficiencies onshore.
2. Value
Due to the perceived higher cost structure of an Australian-based SMSF administration partner, some businesses feel to boost their profit margin they need to engage in offshore labour. Pricing is a ‘hygiene’ factor only and a cheaper online compliance-only solution does not necessarily provide value. Value can be delivered in different ways including partnering with high quality, local experts at competitive rates who can communicate directly with an adviser to build relationships and share insights on how to grow their SMSF business.
3. Security
Offshore outsourced providers may give reams of information and documents detailing their data security policies, however it cannot be denied that outsourcing overseas adds another layer of complexity – especially when data security is breached. Unauthorised use or disclosure of tax file numbers is an offence under the Taxation Administration Act. The Accounting Professional and Ethical Standards Board and the Australian Securities and Investments Commission also require adequate disclosure of:
a) The activities you will outsource;
b) The service provider;
c) How you will monitor the provision of service; and
d) Who will do the monitoring and how often.
Many trustees and advisers prefer all SMSF data remain in Australia. Automation is the key to working smarter in this day and age, and intelligent technology gives local advisers the leading edge over manpower.
Additionally, keeping business onshore saves Australian jobs for graduates and those commencing a career in financial services.
Kris Kitto is director of Superfund Wholesale
Making a case against something by describing it as complex, difficult or expensive is entirely subjective and relative. Does the author seriously think business owners aren’t weighing-up issues like language barriers, time-zone differences, data security, “ease” and so on…ahead of making decisions to outsource or offshore? Of course, they are and the fact they still make the decision to offshore or outsource should tell you something about local “competition”. Business owners who make decisions to outsource/offshore clearly desire efficiency, they’re likely cost conscious and recognise the advantage of using technology to improve systems and processes. I’ll bet they have the client’s experience front-of-mind and are striving to ensure it is the best experience they can deliver for the quality they are aiming for, which does not necessarily need to be the highest quality. (You only need to have flown on a discount airline to know that there’s a sizeable market of people who are very happy to forgo quality, convenience, and even security if it means keeping the cost down).
As for the “keeping jobs local” canard…we should be exhorting people not to “buy local”, but to “buy excellent!” Businesses that are “good” will be “supported” no matter, and when they’re good the benefits they provide transcend the local economy. There’s simply no economic case whatsoever that can be made for “keeping jobs local”. If you’re a small business owner and you haven’t got a “10,000 mile diet” or appetite for technology, you’re just not going to be around long enough to even think about hiring a graduate. A “buy local” attitude in a financial planning business would mean forgoing modern tools like Jotform, Xero, Ontraport, Dropbox, Calendly, GoTo Meeting, Office365..to name just a few that we use.
Thanks Kris. I ran an outsource company for years but lost out to cheap overseas providers. Loss of data is not a concern for most as they do not know the risk of emailing personal and sensitive info.
Kris I applaud the outsourcing idea but the xenophobic fear mongering about sending data overseas is too much a blanket statement
The headline got you to read the article didn’t it? 😀
I can’t see any “xenophobic fear mongering” references.
Physical location is secondary to the 3 key points: Innovation, Value and Data Security.