SMSFs called on to avoid managed funds

Financial planners should consider the benefits of directly investing client monies instead of managed funds within Self Managed Superannuation Funds (SMSFs) argues financial services groupShadforths.

Speaking at a Sydney seminar on financial planning for pre and post retirees, Shadforths planner, Dominic Mulcahy, says one of the key drivers in the growth of SMSFs is broad investor dissatisfaction with managed investment structures.

He argues that the availability of efficient computer systems and independent advice makes advice on direct investments relatively simple.

“Investors are opening their eyes to the options available and are seeking out vehicles that will enable a more transparent investment process where they can decide upon underlying investments and the fees they will pay for management and strategic advice,” Mulcahy says.

“To me, the smart choices in today’s market are structures such as SMSFs and investment platforms that allow investors to take control over their investments and provide advisers with more tools to assist their clients in meeting their investment objectives,” Mulcahy says.

He adds that when considering SMSFs or platforms a direct investment approach plays a pivotal role in constructing portfolios that are unique to each member’s circumstances.

Mulcahy says this is because most people opting to invest through SMSFs or a superannuation platform/master trust are doing so to establish a customised portfolio and gain greater investment control and choice, reduced fees and the ability to individually manage taxation on contributions, earnings and capital gains.

However Mulcahy believes a large proportion of advisers continue to recommend managed investments even if they have the capacity to transact in direct investments and their clients have sufficient funds available to achieve a well-diversified portfolio.

“I continue to be amazed at the number of times I have found managed funds recommended by advisers for their clients within SMSFs,” he says.

“When considering the two layers of fees that results without adding any additional benefit to investors over other structures I fail to understand the motivation of the adviser to put together an SMSF with this type of managed approach.”