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Direct Investment

Blog | How direct investment can give you greater control

Alison Dellow
Private Client Adviser
14 Apr 2020

Over 600,000 Australian’s have applied for an early release of their super under the Government’s plan to assist people out of work and facing financial hardship during this pandemic.

This has since raised concerns on how industry and retail super funds are going to meet the demand as some of these funds have high exposures to illiquid investments such as property, infrastructure and private equity, which are harder to sell in times of economic downturn.

Some of the nation’s largest super funds have the power to delay or suspend withdrawals. Hostplus, Rest, UniSuper and Cbus all have variations of a clause that could enable the fund to suspend payments to members in a range of circumstances.

This causes a major concern when it comes to the control of your own money.

Super fund assets, both industry and retail, are managed by third-party investment managers. These assets are invested in line with your choice of investment option; however, no consideration is given to your specific goals or what you want to achieve. Decisions to buy and sell assets are also made under the discretion of the manager, meaning you have no control over the manager’s decisions.

This lack of control and transparency means that you can be at the mercy of other investors and poorly motivated investment decisions, particularly during these uncertain times.

The ongoing threat of COVID-19 has created substantial uncertainty for investors and financial markets which could lead them to make irrational decisions like selling high-quality investments at low prices, or in this case forced to sell investments to ensure there is enough liquidity to fund withdrawals.

For accumulators, industry funds are a great low-cost offering to ensure you are building your wealth for the long term. However, as your balance grows, so do your options and the ability to have more control over your financial future.

With appropriate scale, we are strong advocates of direct investment where you essentially own a part of the asset, for example buying shares in a company.

This is where a self-managed super fund (SMSF) can be a great alternative to an industry or retail super fund as you would ultimately have complete control and transparency on what you are invested in and have the ability to align your investments with your long term goals.

By constructing a diverse portfolio of direct assets(including shares, property and fixed interest), you and your financial adviser have the ability to make investment decisions based on what you want to achieve. While you don’t have control of the short-term value fluctuations, you can control your investment decisions and cash flow. Over the long term, we are able to estimate the likely dividend, rent or interest that can be generated from these investments.

An SMSF can be slightly more expensive to run which is why the scale is also an important consideration. The benefits of an SMSF, such as control, flexibility and cashflow, must outweigh the additional costs.

At Hewison Private Wealth, we want to ensure our clients have ultimate control over their financial future and direct investment plays an important part in that reality.

If you would like to understand more about our direct investment philosophy we encourage you to CONTACT US.

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.