First appeared in the Australian Financial Review, 6 November 2017
If you are an avid reader of articles like this that often talk about the opportunities and risks associated with running a self-managed superannuation fund (SMSF), one of the recurring themes you may notice is the need for professional support. The question then becomes: how do you get it?
Many people may define a successful SMSF as one that generates a higher than expected level of return from the investments. This involves having the right investment expertise, combined with a positive market.
However, a successful SMSF should not just be viewed as having chosen the right investments. In many cases the same investments may have been available to you through more traditional super funds, such as those offered by larger financial institutions, industry funds and some employer funds. Instead, as the trustee and custodian of your own super savings, a successful SMSF should be viewed as one where you have great comfort that the fund is operating well and all necessary items are attended to in a timely manner.
So, how do you get this level of comfort? The first thing to remember is that "self-managed" is not the same as "do-it-yourself". SMSFs are often referred to as a DIY fund, but the only aspect that needs to be DIY is the fact you must be a trustee. So where do you start to get good advice?
First, you should ensure that your SMSF is being professionally administered. There are a number of aspects to this. Unless you are an accountant by trade, you really should think about engaging an accountant to assist with the running of the fund – someone to help with the accounts, book keeping and preparation of statements and returns. SMSFs are subject to a different set of rules to other investment vehicles, so consider talking to an accountant who has sufficient experience in administering SMSFs. Your existing accountant may not have this.
Another aspect of the administration of your fund is the annual tax and audit requirements. Your SMSF's accountant may also be a registered tax agent and experienced with SMSF tax obligations, but your auditor needs to be independent. Again, you consider engaging an auditor who is experienced with the operation of SMSFs. Ideally, your accountant will be able to recommend one.
You should also be aware of the different administrative systems that accountants may use to support your SMSF. Specialised SMSF systems may be more beneficial than the shoe box and spreadsheet approach, as they can be updated for legislative and regulatory changes by the software provider.
The next professional to consider is a lawyer. Ultimately, your SMSF operations will be governed by a trust deed – a legal document that a lawyer can draft for you. Selecting the right trust deed with the appropriate flexibility from the very beginning is important, as it can be hard to change down the track.
Seek quality advice
Finally, you could consider talking to a professional financial adviser. While some people have set up their own SMSFs in the belief they don't need an adviser and can pick investments themselves, remember that the role of a professional adviser is much more than just an asset selector. By seeking quality advice, you can have access to an educator, or perhaps mentor, to support you in your role as an SMSF trustee.
Super laws are complex, and it is not always realistic to stay across them all. A good adviser will be able to assist with updating you on legislative changes that may impact your SMSF strategies and investments, and also help you gain comfort that you have an appropriate investment strategy in place. And of course, they can help to ensure you have considered all legal requirements, and that your chosen approach will assist you in working towards your longer term retirement and investment goals.
Not to mention investment selection as well. Investing with the assistance of an adviser may allow you to utilise investments that you couldn't access on your own, and sometimes at a lower investment fee.
In addition, you may consider the use of an administrative platform to hold the investments in your SMSF. A good platform will not only talk to the underlying administration system used by your accountant, but it can make reporting and documentation much simpler. And a good platform could allow you, your adviser and your accountant to all be able to see what is happening in your fund at any point in time.
Do your research
Now, none of these services come for free, so you need to determine which ones you need and to what degree, or at what point in time. There are a number of tasks that you may be comfortable in performing yourself and this can help to reduce the cost. And some costs may help to offset others. For example, the use of an administrative platform to hold your investments may help to reduce the costs of the administration service from an accountant as some of the work is essentially done for them. Costs will vary from different providers for all these services, so know what you want and how much you are willing to pay.
Just like investments, the best way to find professional support is to do your research. Ask the professionals you are considering engaging with about their experience with SMSFs, how many they look after and how long they have been doing it. Ask what qualifications they have, as there are some specific qualifications issued by industry bodies that are specific to the SMSF sector. And ask your friends about their experiences, or go online and see what others say. Online sources such as BT Adviser View and Adviser Ratings can let you search for advisers based on areas of expertise and see what others have to say.
Bryan Ashenden is Head of Financial Literacy and Advocacy at BT Financial Group
Information current as at update 6 November 2017. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any super law considerations or comments outlined above are general statements only, based on an interpretation of the current super laws, and do not constitute legal advice. This publication has been prepared by BT Financial Group, a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL & Australian credit licence 233714.
BT Portfolio Services Ltd ABN 73 095 055 208 AFSL 233715 (BTPS) operates Panorama Investments and administers Panorama Super. BT Funds Management Limited ABN 63 002 916 458 AFSL 233724 (BTFM) is the trustee and issuer of Panorama Super, which is part of Retirement Wrap ABN 39 827 542 991. Westpac Financial Services Ltd ABN 20 000 241 127 AFSL 233716 (WFSL) is the responsible entity and issuer of interests in BT Managed Portfolios. Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714 (Westpac) is the issuer of the BT Cash Management Account (BT CMA). Together, these products are referred to as the Panorama products.
A Product Disclosure Statement or other disclosure document (PDS) for the Panorama products can be obtained by contacting BT on 1300 881 716 or by visiting www.panorama.com.au. You should obtain and consider the relevant PDS before deciding whether to acquire, continue to hold or dispose of interests in the Panorama products.
In addition, BTPS is the provider of the SMSF Establishment Service and the SMSF Administration Service. A Guide and Terms and Conditions is available for each of these services by contacting BTPS on 1300 881 716. BTPS, BTFM and WFSL are subsidiaries of Westpac. Apart from any interest investors may have in Westpac term deposits, Westpac securities or the BT CMA acquired through the Panorama products, an investment in, or acquired using, the Panorama products is not an investment in, deposit with or any other liability of Westpac or any other company in the Westpac Group. These investments are subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. Westpac and its related entities do not stand behind or otherwise guarantee the capital value or investment performance of any investments in, or acquired through, the Panorama products.
BT's Adviser View aims to provide you with information to help you choose an Adviser that’s right for you. By conducting a simple search based on your postcode, or chosen speciality, BT's Adviser View will list certain Advisers (within the Westpac Group^) and provide you with details regarding their qualifications, their areas of speciality and professional memberships. BT Advisers are representatives of Westpac Banking Corporation ABN 33 007 457 141 AFSL & Australian Credit Licence 233714 (Westpac). BT Advice is a division of Westpac. Magnitude is a trading name of Magnitude Group Pty Ltd ABN 54 086 266 202 AFSL 221557 (Magnitude). Magnitude is part of BT Financial Group. Securitor is a trading name of Securitor Financial Group Limited ABN 48 009 189 495 AFSL 240687 (Securitor). Securitor is part of BT Financial Group. ©BT Financial Group 2017