Are Self-Managed Super Funds a Good Idea?
They absolutely can be. In fact they can be the stand out best solution when what you want is flexibility and control.
SMSF’s give you almost the same flexibility to invest as you enjoy as an individual. It’s most typical in our experience that people who are suited to setting them up have a property investment strategy and/or want to invest in direct shares, as well having as the flexibility to include other satellite investments such as limited access managed funds, term deposits and annuities. However an SMSF also allows for investments considered exotic, such as collectable coins, art or even wine.
The rule book (or in other words the framework) that you must work within is mapped out in the fund’s trust deed, so it's important that you are fully aware of what your limitations are as a trustee. In broad terms, if the wealth creation strategy you have in mind is for the sole purpose of achieving growth and income for your retirement, then you are probably allowed to do it, however take special note of the reference to ‘probably’.
The rules are regularly changing and it is more complex than investing as an individual because regulation is there to try and protect your funds, to ensure you have an asset you can rely on in retirement. Before embarking down this road, it is certainly prudent to seek advice.
SMSF’s can also be the most cost effective solution. Cost benefits depend on the strategy you are taking, but can kick in anywhere from $300,000 - $800,000 in our experience. While minimising cost is good, it is not normally a good enough reason in isolation to set one up. It’s all well and good to be paying less, but if you do not invest well and achieve a lower equivalent return than a managed solution, then the opportunity cost of achieving a higher return will typically outstrip the potential cost saving.
Given all of this, be clear on ‘why’ you want to set up a fund and then consider if it’s cost effective and if the rules will allow you to implement your wealth creation strategy the way you want to. For extra prudence, you should also speak to a financial planner to have them sanity check your decision making process with you, considerate of your tolerance for risk, age and alternative strategies amongst other things.
Speak to one of our degree qualified advisers about how this relates to you.
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The content of this presentation is intended to be general information only and has been prepared without taking into account any person’s objectives, financial situation or needs. Each person should consider its appropriateness having regard to these matters or obtain relevant professional financial advice before making any financial decisions. Examples are illustrative only. Each person should obtain any relevant professional financial, taxation and social security advice before making any financial decisions.