Adviser feedback

Question: Do you advise on self managed superannuation funds?

Question: Do you advise on self managed superannuation funds?

“Yes, we do advise on self managed superannuation funds. There’s been a lot of these coming up over the past few years. One reason why people want them is be-cause they give them the psychological feeling of having things under control. The problem is that these tend to be amateur clients and they can demand a fair bit of your time. If they are large clients and willing to pay, that isn’t a problem. But if they have a small fund with, say, $100,000 and trade in shares, they may be con-stantly ringing you up, and that could be a problem. I think most advisers are fac-ing similar problems and need to decide how to charge these clients. Because we are an accounting firm, we can charge them an hourly rate. But in my view, it isn’t worth having a self managed superannuation fund with less than $200,000 in it, because of the compliance costs. This client may be better off turning to profes-sional managers in the long run.”

Simon Wu

Simon Wu & Co

Part of Count Wealth Accountants

“Yes, we do (give this kind of advice). We look at what the client is trying to achieve and then plug into the most appropriate place. If a self managed superan-nuation fund helps them achieve their goals, we will recommend it. But often cli-ents don’t need to go this route. It just makes their lives more complicated and is more expensive.

Self managed super funds are generally good clients to have. Firstly, they tend to have more money to invest and secondly, they tend to be more sophisticated in their financial dealings, which ultimately makes life easier.”

Tim Rossell

Guest Mcleod

Yes. I think that if a client has less than $150-200,000 in this type of fund, though, I’d tell them not to worry about it. Self managed superannuation funds are only for peo-ple who want specific investments and who are taking an active interest in the invest-ments.

I tend to think with the new regulations, where a self managed superannuation fund member has to be a trustee, this doesn’t cause any problem. But the fact that a self managed superannuation fund can’t invest in associated entities is. All investments in these funds must now be arms-length from the fund members. This is a headache, though fund members have got a period within which to unwind these particular in-vestments.

Self managed superannuation funds do offer extremely good flexibility, as opposed to, say, a master trust. But a lot of people went into self managed super funds in the belief that it’s cheaper to run them. It isn’t. If people are going into these funds for cost reasons, then they’re mistaken. You need to have over $150-200,000 to make it worthwhile.

Greg Curry, Morgan Stockbroking

Yes. One of the key issues with self managed superannuation funds is the need for adequate insurance cover. This is an issue that’s being missed, probably because most of the people putting these funds together are accountants and they don’t un-derstand insurance.

We give a lot of advice on these funds and find another problem is that when peo-ple start up a self managed superannuation fund, something like 60 per cent is in-vested in fixed interest and bank accounts.

Some people do choose to invest in self managed superannuation funds for control. They want to control their investments and not just hand their super over to a fund manager. But you really have to run the fund and have a look at your investments on a regular basis. Because they’re busy running their businesses, though, they don’t actually pay that much attention to their superannuation.

Many small businesses use these funds as a tax vehicle, whereas they should be an accumulation vehicle. This runs contrary to the basic logic behind superannuation.

John Hibberd

AMP Financial Planning