So you’re still running a trust account but your competitors aren’t?

Just how long will agents stay rusted onto their trust accounts, when there is an alternative?

Trust account misappropriation is a spiralling issue that taints every agent that operates one. However, property managers who have switched to secure automated payments are gaining market share, fast.

Ask any property manager if they like managing a trust account and immersing themselves in end-of-month reconciliations. The answer will be “no!”

But most agencies still convince themselves it’s “the better the devil you know”, and keep plugging away while finding it harder by the day to attract new blood into the business to take up the tiresome and stressful administration connected to operating a trust account.

Every time there’s another announcement about theft or misappropriation, with another agent banned, sound operators suffer the consequences when it comes to reputational damage.

One former Sydney agent was recently ordered to pay a hefty $100,000 to the Property Services Compensation Fund – the maximum allowed – and legal costs totalling $30,000 for misappropriating over $1.4 million from trust accounts.

The agent was also sentenced to a two-year and 10-month intensive corrections order and 450 hours of community service. That’s a significant indication on the seriousness of the fraud that took place.

With rental payments worth billions of dollars changing hands every month, the hard-earned investments of landlords and rental payments of tenants are at stake. That expect their funds to be protected.

This is why more owners are now looking for tech-driven agencies that use secure platforms like Managed to ensure that their income is not at risk due to trust account abuse.

Trust account abuse blemishes most of the industry, but not the cutting edge

Over the last few years forward-looking agencies, and a new breed of start-ups, have quietly been transforming their customer proposition and business efficiencies by adopting automated secure payment platforms for real estate rental transactions – which includes rents as well as all connected rent roll-related disbursements.

This new tech is not only central to safeguarding against trust abuse, it’s also pivotal to growing and managing their rent roll, driving productivity, and importantly, profitability.

Sydney’s NU Management, for example, is just one of a new breed of agents that was quick to spot the opportunity to run a more efficient agency, and carve out a point of difference through its choice of property management platform and the payments proposition it was built around.

Catering for a premium market in a very competitive space, director Grant McKay has quickly built a rent roll of almost 150 properties since launching in 2022.

He knew there was a more innovative solution than the traditional trust account, with the belief it was no longer the only option for principals – and actually questioned whether it would be around for much longer. Grant is just one of a rapidly emerging cohort of forward-thinking principals with a clear business objective built around a secure and direct payments property management solution.

Here are the four main reasons why forward-leaning agencies are embracing new payments tech:

1. The tide has turned

Research by Agile Market Intelligence shows 30 per cent of agents are now considering automated payments as an alternative to running a trust account, while 10 per cent have already switched.

But most agents procrastinate despite the risks. It’s easy to understand why.

Change is hard, and there will be team members who are resistant – that’s always the way. People like the systems they are used to, even when they may know they have flaws or are outdated.

There is also hesitation as many agencies wait for regulators and government agencies to catch up and endorse the new tech (which my colleague Alex Whitlock wrote about recently).

Nevertheless, despite this, more nimble agencies are going with the flow – not fighting against it.

2. Boost profit or increase costs?

Trust accounts are becoming more expensive to operate due to audit fees and bank fees. Some agents tell me that while an experienced property manager used to cost around $85,000, in some instances this has almost doubled to $145,000.

Another agent that earned $1 million in revenue from their rent roll would have had to spend almost $90,000 to recruit a trust accountant with property management experience.

Digital payment platforms slash administrative costs by up to 90 per cent by transferring rental income in real-time, and as such, boost profitability. Moreover, landlords and tenants have peace of mind because they can access their funds and view their finances anywhere, anytime, via the platform.

3. Flex your tech to recruit top talent

To manage a trust account, agencies need specialist property managers with a background in accounting and comprehensive knowledge of debits, credits and ledgers. New entrants to property management do not want the responsibility of manually handling trust accounts and reconciliations.

Recruiting and retaining top talent becomes easier for agencies using an automated payments platform as the administrative burden is reduced and the process of collecting and distributing rental income is seamless for property managers.

The opportunity for agencies is to become an attractive business through offering engaging, interesting work, where property managers are proactively supporting investors and tenants, rather than burdened down with unnecessary, and often frustrating, administration.

4. Compliance made easy

New anti-money laundering legislation will bring additional reporting requirements for property managers this year. Agencies serious about preventing trust account abuse must look at using automated payment platforms like Managed, which has anti-money laundering and counter-terrorism safeguards incorporated in the system.

The case for change is clear

The tide has turned in the real estate industry, with more and more tech-driven agencies leveraging automated payment solutions to streamline efficiencies, enhance security and compliance, and reduce costs and administrative headaches.

Automated payment platforms remove the burden of handling trust accounts so property managers can go back to what they do best: offer unparalleled customer service and build long-term relationships with clients.

It’s time for you to gain an edge with secure automated payments before your clients demand it off you, or worse, leave you for someone who uses the technology.

To hear more about the future of property management and secure digital payments from me and a panel of speakers, register for the REB Masterclass for free.

Rohith George is the chief operating officer at Managed (www.managedapp.com.au).