The AI crystal ball

Artificial intelligence is just starting to play a role in many aspects of our lives. LightYear Docs director and founder Grant Abbott forecasts what its effect will be on the SMSF sector.

Let’s start with something a little different, an SMSF poem by Jack Kerouac.

On the SMSF Road to Financial Freedom

Man, it’s the open road and the open sky, Down under, where kangaroos leap and wild dreams fly.

Aussies, man, they got the groove, the beat, Self-managed super funds, that’s where the journey’s sweet.

No fat cats, no big-shot suits,

Just raw, unfiltered life, man, where freedom roots.

It’s the jazz of investment, each note a choice, Riding the highway, hearing your own voice.

From Sydney’s rush to the Outback’s hush, They’re carving paths with a steady hush.

It’s their stash, their cash, their golden sun, On the road, man, where the SMSFs wild run.

You have to love the author and he loves SMSFs. In this body of work he has really nailed all that is important about them – freedom, dreams and control of your destiny. This is why we have seen a huge increase in SMSF start-ups with millennials, who are by far the most independent of the generations, ready to do their own thing rather than being chained to work like their parents.

Technology changes everything

When I first started at KPMG as a tax consultant in 1989, I was lucky enough to be given an Apple Macintosh computer. Having learned to type instead of doing woodwork at school paid off as I could turn around letters of advice faster than my colleagues, including partners and managers who had to wait for the Wang word-processing ladies to go through the queue. Being a junior I held no weight when it came to trying to get work done so I did it on the Mac myself. Of course, I was hauled into the partner’s office and told to stop doing this and all I had to say was: “Do you want your client work out quickly and billed at the same time or wait for weeks until it progresses through the queue?” Game over, the partner was sold on the idea and billable hours went up.

The Mac was the first stage of technology and the next was the evolution of the internet. Suddenly everything was at our fingertips, provided we knew how to find it. I remember doing Australia’s first-ever financial video streaming over the internet back in 1998 when the speed was terrible. Then when broadband came online in the early 2000s, recording videos was more viable and working from home was enabled. Basically the internet and broadband freed up my life.

And now we have artificial intelligence or AI, which to me is the most amazing development. I did my first AI training in April 2023 for accountants and do regular sessions showing how to use it for blogs, letters of advice, emails, social media, speeches and copy for marketing and videos. It is the great leveller and enables accountants and SMSF advisers who use the right tools to be equal in knowledge and as skilled at writing.

But we are only at the very infancy of AI and moving quickly to where it will outperform me, I’m predicting by 2026 at the latest, and then get to superintelligence by 2029 where it will generate strategies and ideas beyond human capabilities. And I want to be there when it does. Can you imagine how fun it will be?

In the meantime, I thought to challenge you and myself and take a ride to 2030 to forecast where SMSFs will be and what the industry will look like.

Reflecting on a decade of AI SMSF evolution

As we stand in 2030, the evolution of AI in the SMSF industry has been nothing short of revolutionary. AI is now superintelligent and does most of the hard, grinding work SMSF administrators used to do and has evolved into a personal SMSF manager, bypassing the need for accountants and administration.

Superintelligent agents

Superintelligent agents leverage deep learning, natural language processing and advanced data analytics to understand and predict market trends, automate routine tasks and ensure compliance with regulatory frameworks. They will operate for each SMSF and run autonomously in the background, providing a much cheaper ramp for SMSF start-ups. I’m predicting a time when individuals will be able to commence an SMSF for less than $20,000.

Common SMSF tasks now and with super AI agents

Before we get into how things are going to change, it is vital to understand that once AI agents are employed, there is no extra cost for having 1 million agents working on a task or one agent. Importantly, there will be different agents doing different tasks and being specialists at that task right down to microdetail. For example, there will be agents that monitor the Australian Securities Exchange and look for all published actions on companies, including dividends, changes in shareholdings, director sales and, well, all company actions. This will happen instantaneously and be transferred to the SMSF accounting agent, the SMSF compliance agent and also the SMSF investment agent, who will analyse the value or perceived value of the stock based on all available and existing investment analysis and adjust the stock weighting accordingly.

Here we break down nine common SMSF tasks and illustrate how these super AI agents can revolutionise their execution and more importantly do it on their own without any physical help:

1. Upgrading trust deeds

• Current requirements: Regularly updating trust deeds to comply with legislative changes and best practices is mandatory, particularly if laws, cases and new strategies emerge that extend beyond the thinking of current SMSF deed drafters.

• AI agent handling: The super AI agent deployed by a legal firm can monitor legislative updates in real time, draft necessary amendments and automatically update trust deeds in a central repository for all SMSF clients. This process, which currently typically takes weeks in drafting and deploying plus rolling out, can be reduced to mere minutes with a super AI agent.

2. Document management

• Current requirements: Maintaining accurate and accessible records of all SMSF-related documents. This can be painful although automation has improved the time handling and document retrieval significantly.

• AI agent handling: Superintelligent agents can automate document filing, indexing and retrieval, ensuring all records are up-to-date and instantly accessible, reducing manual effort and potential for error. This happens on a real-time basis as there is an agent built solely for notifying when a bank or other institution updates its information.

3. Financial accounting

• Current requirements: This often happens a year or more after the transaction, but compliance requires the recording of all financial transactions, preparing financial statements and ensuring accuracy and, most of all, compliance with the Superannuation Industry (Supervision) (SIS) Act 1993.

• AI agent handling: An AI agent can process transactions in real time, generate financial statements, conduct automated reconciliations and SIS Act compliance analysis, dramatically cutting down the time required for accounting from days to minutes, but in real time.

4. Income verification

• Current requirements: Verifying and recording income items such as dividends, interest and rent.

• AI agent handling: AI systems can automatically verify income items against market data and update records instantly, ensuring accuracy and compliance.

5. Conducting SMSF audits

• Current requirements: Performing annual audits to ensure compliance with SMSF regulations as mandated under the SIS Act.

• AI agent handling: There will be specific AI audit agents that can perform continuous auditing by analysing transactions as they occur, flagging discrepancies immediately, and generating audit reports in real time, reducing the audit cycle from months to hours.

6. Making investments

• Current requirements: The trustee or their outsourced financial planner needs to research, evaluate and execute investment decisions.

• AI agent handling: AI can use any existing investment analysis and take into account vast amounts of market data, predict trends and execute trades at optimal times, ensuring strategic and profitable investments almost instantaneously.

7. Pension strategies

• Current requirements: Calculating pension amounts according to ATO guidelines, setting up payment schedules and ensuring compliance with pension regulations, including obtaining the preparation of relevant documents.

• AI agent handling: AI can automatically calculate optimal pension amounts based on member data, determine the best tax and transfer balance account report set-ups, calculate the impact of maintaining a pension or commutating it, set up payment schedules, ensure regulatory compliance and prepare every possible pension document, all within seconds.

8. Fund wind-up

• Current requirements: Checking the deed, liquidating assets, reviewing all bank accounts, checking with the fund’s auditors, settling liabilities, distributing remaining benefits and lodging the fund’s final tax and compliance return.

• AI agent handling: AI can manage the entire process of winding up a fund and preparing all documentation, plus tasks from asset liquidation to final benefit distribution, efficiently and accurately, reducing a potentially lengthy process to a matter of hours.

9. Managing incapacity or death

• Current requirements: Implementing predetermined plans for managing the fund when a member becomes incapacitated or passes away, and if no plan is in place, letting it linger dangerously for a year or more.

• AI agent handling: AI can automatically activate industry best practice plans from the moment of death, prepare all necessary documents, deal with the Australian Securities and Investments Commission (ASIC) and the ATO, ensure seamless transition and management of the fund, handling all administrative, accounting, compliance and legal requirements instantaneously.

Complacency: a gift to the ATO

All of this is coming so we need to get in front of the wave. But everyone needs to be wary that the ATO and ASIC will also have as many AI super agents as possible to make sure real-time compliance and management is happening.