As workplaces are becoming increasingly digitalised, trust accounting processes are becoming simpler and more streamlined. Most agencies have now turned to customised software – not only does it offer more efficient solutions, but agencies can also have better security and ‘trust’ in their trust accounting functions.
Chief executive officer of REINSW Tim McKibbin shares some of his insights on how trust accounting is being positioned as the next likely candidate for disruption and change in real estate, particularly in the property management sector.
Trust accounting in real estate
Real estate agencies are required by law to retain their clients’ money for a variety of purposes – rent collection and deposits on property sales being the most common. The logistics around how that money is managed are complex, but critical to the successful operation of the business.
Trust accounting is more than just holding money for tenants and property owners; it requires meticulous bookkeeping, regular auditing and reporting, and a strict adherence to specific legislation around the agency’s responsibilities. Most agencies will have designated staff – usually the finance person or people – who are responsible for their trust accounting. They monitor activity in the trust account and, as is still the case in a number of agencies, maintain manual processes around that activity.
While software developers are presenting opportunities that continues to change the face of real estate and property technology, the future of traditional trust accounts – for property management specifically – has been in question for some time.
Trust accounting software made for property management
With the enormous amount of transactions going through trust accounts for property management, and the legal requirements for an agency to have a trust account if they are receiving trust moneys, it is property management for which the disrupters are developing the technology.
What is proposed moving forward, in the simplest of terms, is that where previously an agency only needed a trust account in circumstances where they were holding somebody else’s money, in trust accounting’s future, agencies would no longer hold the money at all.
McKibbin puts in more details on how it would work. “An agency would have one trust account, but within their software have separate allocated ‘trust accounts’ for every person that they’re acting for. When the money comes into the agency, it comes into their main single trust account. Instead of the money going into the hands of the agent, being received by the agent and processed manually, an alternative software design allows that the money never actually comes into the agent; it goes within the system to the landlord, then the software processes and records the activity.”
But how will this affect agencies specifically in the future? “It gets complicated because the technology is racing ahead of the regulatory environment,” says McKibbin. “So much of the regulatory environment that we are working in today was introduced in 2002. So, the question is whether or not what these solutions are doing actually complies with the legislation and that’s a question we’ve asked the Office of Fair Trading.” In short, either the legislation has to catch up to technological and industrial change or the industry has to fumble on in transition while the paper shufflers catch up.
The challenges around trust accounting and its new generation of software will be more keenly felt by the regulators than the industry itself. “There are questions about the processes of these solutions and the reasons there are some questions is because the workflow is completely foreign to the regulations,” explains McKibbin. “It doesn’t mean they aren’t compliant, similarly it doesn’t mean that they are. This is why we need clarity around these questions.”
Setting up the future of trust accounting
Most software developers are now focusing on adapting their products to evolve with the changes to trust accounting processes, but also to industry change at the legislative level. “The best way to view the property technology disruption to our industry is to look at the sorts of transactions on which the technology can focus. And if we stratify the total functions across an agency, some functions are repetitive. These high-volume functions, that require minimal human involvement, are a prime target for technology like Artificial Intelligence (AI) to get involved in.”
By digitising high-volume tasks that require little human interaction and streamlining data entry tasks, the industry will ideally become much more personalised. “The things that are going to survive are those where there is human to human interaction; transactions or functions that are unique, that a computer currently can’t deliver in a bespoke way to a client. Computers can’t empathise with the client’s circumstances and they can’t communicate in such a way as to have the client understand them.”
Thriving through customer experiences
People fear the unknown and at the rapid pace technologies are being developed in real estate, it can be quite unsettling. For McKibbin, surviving the transition to new technologies is all about putting the focus back on the customer experience, and he is confident that the industry’s roots of customer centricity will allow the real estate agency to thrive.
He offers the disruption of the fintech industry as a good example of digital change, strengthening the service offering. “With increasing wages in Australia a number of years ago, the technology of the day made it attractive to take data entry functions to countries with cheaper labour. Because tech has taken its next step and AI is now making those people offshore redundant, the next wave of the local labour force can step up to new and more dynamic roles that capitalise on the human experience. It’s certainly the case that technology right across the board is going to impact on all industries including ours.”