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Self-Managed Superannuation Funds

SMSFs are not for everyone

John Hewison
Founder and Director
26 Aug 2013

With the shift to popularity of Self-Managed Superannuation Funds (SMSF), there has been a grab for SMSF market share by the institutional end of town. There has also been a call by some self-interested managed fund veterans for SMSFs to be somehow forced to use “professional” investment managers using their mandate controls.

This is typical of an industry that feeds on greed and attempts to commoditise anything that threatens its control of capital inflows. The institutions that have historically controlled the industry and see the advisory community as its “sales force” have traditionally relied upon product related sales commissions and so-called “service commissions” (really loyalty commissions) to lure funds into their products. But the ban on commissions by FoFA legislation has put a dent in that proposition.

The reality is that SMSFs are an excellent superannuation alternative for clients who understand them, have sufficient capital to justify their use and the capacity to administer them adequately – including the legal compliance requirements. Alternatively, some of these important obligations may be outsourced to a specialist adviser or service provider.

SMSFs offer control and flexibility to the trustees to establish and maintain an investment strategy that is specifically designed to suit their needs – not some institutional mandate that suits the needs of its manager. So from that point of view, the super fund trustee can make its own strategic decisions as and when it desires and determine important issues such as cash-flow management and asset security on behalf of members.

For investors who wish to use managed funds, forget about setting up an SMSF and simply invest in a super fund that offers a range of managed options. It is cheaper, easier and will deliver the desired outcome.

For investors who want control over their superannuation fund assets and cash-flows, who are prepared to do the work or employ the services of specialists, an SMSF could be a great option.

The notion that a SMSF can be used to then invest in managed funds and products is complete nonsense and defeats its main purpose. The duplication of costs is unsustainable and inefficient.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.