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Are SMSF software companies looking for a new way to charge clients ?

By November 25, 2021BGL Update

There have been a lot of changes in the SMSF software industry over the past couple of years.

With no new entrants to the market, some of the existing businesses think they are in a powerful pricing position. And we are seeing this already with 2 software providers charging for (or intending to charge for) API access and 1 adding a cut down external service in an upgrade and pay play. The upgrade, of course, leads to increased revenue to the software company through commissions. With the upgrade and recent charges introduced to API access (most of which will be passed on to clients), their price per fund will be almost $350 per fund per annum + GST.

But what I find more interesting is the suggestion SMSF software suppliers may start charging on the basis of funds under management.

Most of you would be aware, 1 SMSF software supplier has recently been purchased by a financial services platform. The other is already owned by a financial services institution. These businesses already earn much of their revenue from fees based on funds under management Рso is this the future for their SMSF software businesses? I recently read an article in The Sentiment newsletter where an increase in clients and funds under management was being touted as a reason for the purchase of a SMSF software business. That financial software business already charges fees based on the funds under management  I do not think it is a bridge too far to suggest this business may ben considering charging SMSF software clients fees based on funds under management.

Those of us who have been in the SMSF software industry for a while know SMSF software providers have no control over the funds under management of their SMSF software clients.  One provider had to specifically exclude the distribution of their financial products through their SMSF software and through their SMSF administration network from their service agreements.

But maybe times are changing. So maybe in the future this will change,

BGL is not a financial services business and is not owned by a financial service business. While it would be great if we could charge subscription fees based on funds under management (our FUM is around $425b), we have no plans to do so. Nor do we think SMSF software providers should be changing for API access or providing products where forced upgrades are required.

Our pricing strategy is clear and simple. As we add new features and enhancements to our products and services providing our clients with greater efficiencies, we will look to increase our prices. We will never charge on the basis of funds under management – we operate on a subscription fee for service model.

Over time, as our costs increase, so will our product prices. When or how much is determined by us when the time is right.

But I am not so sure of the others.

Only time will tell!

Ron Lesh

Author Ron Lesh

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