Desire for control does not justify SMSF
Investors who opt for self-managed super funds (SMSF) are not necessarily doing it for the right reasons or making the best use of it, according to Perpetual Private.
Senior manager, strategic advice, Colin Lewis, said that while control motivated members to establish SMSFs, it was not the most optimal option if all they did was sit in cash, fixed interest a few shares and managed funds.
"You could've done that in the retail space, so why are you taking on the additional complexity and responsibility of running your own fund?" Lewis asked.
They should be advised to take active positions given the market situation at present.
He also said the SMSF market was largely driven by accountants in the past, and they had a vested interest as they could do the accounting and the auditing, for which they charged extra fees.
It was then a set-and-forget, where many members did not actively pursue how they should appropriately invest in their SMSFs to maximise their returns.
"Basically anybody with any sort of amount of money, their first approach to the client is ‘oh we need an SMSF'. Well in fact do you?" Lewis said.
Members should opt for an SMSF only if they wanted to invest in something that was not available in the retail space such as direct property, which they might want to do through a limited recourse borrowing arrangement.
They should do a cost-benefit analysis, and compare it between being in a retail fund, industry fund or an SMSF, while taking into account the cost of running the fund and the advice component.
"I'm not being anti-SMSF. I think those are the sorts of dynamics in thinking about it rather than just saying, ‘oh well an SMSF will just achieve everything for me'," he said.
AUTHOR
Malavika Santhebennur
Recommended for you
With an advice M&A deal taking around six months to enact, two experts have shared their tips on how buyers and sellers can avoid “deal fatigue” and prevent potential deals from collapsing.
Several financial advisers have been shortlisted in the ninth annual Women in Finance Awards 2025, to be held on 14 November.
Digital advice tools are on the rise, but licensees will need to ensure they still meet adviser obligations or potentially risk a class action if clients lose money from a rogue algorithm.
Shaw and Partners has merged with Sydney wealth manager Kennedy Partners Wealth, while Ord Minnett has hired a private wealth adviser from Morgan Stanley.
