Welcome to the Mclowd Newsletter, our monthly communication to Investors, Marketplace participants and Partners.
“…a strong thread runs through all of this year’s lists and through some of the supporting essays. The thread is that ordinary people are rising up and forcing change on entrenched institutions and holders of authority.”
Introduction
During the September quarter financial services heavyweight AMP experienced SMSF infows of $250 million.
In order to generate this outcome AMP spent tens of millions of $$ on acquisitions, and tens of millions more on integrating their various products and services.
In the same period the Mclowd Community witnessed inflows of $50 million, without an office or any full time staff, leveraging a balance sheet of less than $600K and having virtually no operating expenses.
It is a harsh micro-economic reality but many of the most capital-intensive incumbents in the asset management industry are about to witness price deflation at a speed and on a scale for which they are ill-prepared.
As %-based fee structures are replaced with value-based models that are 70-90% cheaper, they will simply be starved of oxygen, and in many cases eventually expire.
(Australian Super’s decision to insource 30% of their current mandates is a classic example of this process and will cut more than $100 million a year from the funds management fee-fest).
Accounting Platform Update
Unlike incumbent vendors, the Mclowd Community has been built from the ground up to operate at or near marginal cost, so the rapid deflation which is being witnessed all around us now presents a global opportunity, not an existential threat.
Version 3.2 of the accounting software will be live on December 12th, including the following:
- The ability to add franking credits to hybrid securities
- The ability to disable individual bank accounts
- The revaluation process for unlisted equities will be improved
- The details of loan accounts will be incorporated into the assets summary on the Dashboard
In conjunction with SISS Data Services we have now begun working on the integration of bank data feeds. Support for this functionality is scheduled for release in February next year. A full list of the banks can be viewed here.
Migration Activity
An SMSF trustee signs up to Mclowd every few hours, and the rate of migration grows each month. While the process is more involved for practitioners, over the course of 2015 we will build the tools and aggregate the crowdsourced resources necessary to scale up migration from incumbent platforms.
(The idea that this process will be restricted to the SMSF space is not supported by the feedback we are getting from the Community, as similar cost savings are applicable to other entities and geographies).
Postscript
The challenges presented by our journey towards zero marginal cost apply not just to individuals and organisations, but also at a national level.
As deflation takes hold, countries whose overall cost structure is both high and inflexible will be vulnerable to macro-level shocks .
No country understands this more than Germany, which is investing heavily in terms of renewable energy and smart grid technologies, and in the process building an economy and society that is well positioned for the Third Industrial Revolution.
In comparison, Australia has spent the last ten years pumping $45 billion into Second Industrial Revolution energy infrastructure, and many hundreds more into residential real estate.
The deployment of that capital is based on the same flawed assumptions upon which tens (and in some cases hundreds) of millions of $$ have been spent on cloud-based software solutions.
Unfortunately for Australia, the consequences in terms of future income, employment and government receipts will be generational.
Kind Regards
Ashley Porter
Managing Director
Mclowd Pty Ltd