Four signs your current SMSF may not be working for you

More than $700 billion of Australia’s $2.5 trillion superannuation investments are held in SMSF, making them an important part of the nation’s financial landscape.

Self Managed Super Funds (SMSFs) can be a great option for some people and business owners often find many advantages to structuring their super in this way, especially with technology helping to lower costs and improve ease of meeting compliance and reporting requirements.

As business and life distract us, however, the attention you give your super fund often wanes and this can mean you’re not getting the most out of your SMSF. The new year is a great time to take a look at your super and address any niggling worries you may have. Here are four common signs that it may be time to make changes to your SMSF:

  • Fees are eating into your investment. It’s not until something happens – like taking a break from regularly depositing funds into your SMSF – that you really notice how your balance may be affected by fees. These fees can relate to the administration of your SMSF or to the management of your investments. Either way, a small difference in fees can make a big difference to your balance in retirement.
  • Your SMSF is poorly diversified. In a study by Vanguard and Investment Trends, half of SMSF trustees reported that more than 50 per cent of their investments were held in a single asset type. This can leave your investments highly vulnerable to market gyrations and volatility. Things like low-cost exchange-traded funds (ETFs) can add instant diversification to your SMSF to help smooth out the highs and lows of market cycles.
  • You feel very worried about your SMSF. Some people managing their own investments don’t necessarily feel confident making every investment decision due to lack of experience in particular areas. This can create fear and worries when trying to make decisions about asset allocation, investment strategy and altering your strategy. If you’re feeling worried, you should perhaps seek some advice.
    Your worries may also relate to the financial advice you’re receiving. The Banking Royal Commission highlighted some serious concerns about conflicts of interest and unethical behaviour in the superannuation sector; if you’re reading stories about the Royal Commission and fear you could be in the same position, it might be time to consider whether you’re happy with the advice you’re receiving.
  • You can’t easily get the information you need. Lots of people with older SMSFs may still not have online access to their account, meaning they may have had to rely on a financial adviser to provide information on performance and costs. This may mean you’re not getting the most out of your investments. You may need to ask your advisor, such as how your investments have performed during recent market volatility, the risk profile of your investments, whether you’re adequately insured, and how much you’re paying in fees.

What to do if this sounds like you?

SMSF set-up/administration and investment management have evolved rapidly in recent years, and if you’ve had an SMSF for a long time, it’s certainly worth evaluating regularly whether it’s keeping up with your needs or whether it’s time for a change.

Consider why you started an SMSF in the first place – the potential benefits and disadvantages can be very different depending on the kind of business you run and how your SMSF has been set up. Ultimately, your time and involvement are a key requirement of having an SMSF. Your superannuation is one of your most valuable and important assets, so you deserve to feel confident and comfortable about how it’s being managed.

Pat Garrett, CEO, Six Park

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