Recently I’ve had a number of clients enquire about the pros and cons of setting up a Self-Managed Super Fund (SMSF). They have an instinct to get more control over their investments in Super. But they’re hesitant about the additional work involved in running a SMSF and are unsure of the costs.
There’s no perfect answer to the question, assuming one has sufficient funds to make it cost-effective. Anecdotally, I have seen a broad range of SMSF outcomes.
Some are pretty dysfunctional. Large long-term cash allocations, a jumble of different assets cobbled together over time, or speculative investment properties in far flung mining towns that are well underwater.
Conversely, some are fantastic. Low relative administration costs, a thoughtful spread of investments, and a clear strategy that is able to differentiate from the increasingly herd-like solutions being offered by the big retail and industry super funds.
Three reflections I have from seeing successful SMSFs in the wild:
1. Have a plan:
Running a SMSF well requires careful planning and a clear investment strategy. This is the cost of admission to the wide-world outside the walls of the retail/industry superfunds. A clear plan is crucial for SMSF trustees to help with consistent, long-term decisions, particularly in difficult investment markets.
2. Utilise the flexibility:
The main structural benefit of a SMSF is that it opens up the potential range of investment options available to you. SMSF trustees are able to invest in a much wider range of listed investments, real property, and alternative assets. This is increasingly attractive to many in a landscape of low yields and volatile equity markets.
Finding the right professional team to help manage the administration and strategy of the SMSF can make all the difference between building a sustainable fund, and getting burnt out by the increased complexity. While some trustees are die-hard DIY’ers with a focus on reducing fees at all cost, most will benefit from working with a professional team of accountants and advisers.
SMSFs can be a great structure for investors wanting to get more control over their retirement savings. The added responsibility of running a SMSF can be challenging, but it can also serve as a good reminder that our retirement savings are real-life investments, and we will buy our groceries from their returns at some point (if we aren’t already).
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Peter-James Cameron is a Sub-authorised Representative (#1266801 ) of Synectic Wealth Pty Ltd (ABN 24 615 317 194) which is a Corporate Authorised Representative (#1250871) of Alliance Wealth Pty Ltd (ABN 93 161 647 007 | AFSL 449221) www.centrepointalliance.com.au. Synectic Wealth Pty Ltd is the financial services division of Synectic. Learn more here.
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