Self-Managed Super Funds (SMSF’s) are still a popular vehicle for superannuation for Australians and whilst our industry sells them off the back of them being “self-managed”, our experience is that SMSFs are better utilised when there is a trusted financial adviser working alongside the trustees. As a financial product, the financial adviser is licensed to guide the trustees on every aspect of their SMSF journey. There are many decisions that need to be made throughout the life of an SMSF, from Trust Deed reviews and Estate Planning to contribution and pension decisions, and in most cases it’s the Licenced Financial Adviser (Adviser) that is best placed to recommend and implement these changes. We have identified five key areas of managing an SMSF that highlights why the Adviser should be at the centre of the SMSF relationship.
The “Is an SMSF right for you” question
Firstly, an SMSF shouldn’t be established without an SOA. The Adviser can provide certainty and protection for the Trustee of the SMSF because the regulations and SOA requirements that the Adviser must work within ensure that if an SMSF is the choice of vehicle for the client, it will be after a thorough information gathering process. It just makes sense that the trigger to move someone into an SMSF is pulled by the Adviser because they must consider all other options prior to recommending an SMSF, avoiding any risk that the SMSF wasn’t established in the best interests of the client. It is also important that the Trustee regularly considers whether an SMSF is still an appropriate vehicle for them. There are many SMSF established without an SOA that exist year after year without appropriate ongoing advice and regular review. The Adviser has an important role to make sure that the SMSF is performing and not just funding the professionals.
Developing an appropriate Investment Strategy
With the ATO focussing more and more on the Investment Strategy of the SMSF it has become essential that the Trustees have an appropriate Investment Strategy in place. To be appropriate, the strategy must consider the individual circumstances of the SMSF and its members rather than be a generic document downloaded from Accounting software which has traditionally been the process. Whilst the structure of the strategy is being enforced by the Auditors based on the Regulator’s guidance, it is the Adviser that is best placed to drive the process of developing an appropriate Investment Strategy and reviewing it each year. The Adviser’s role is much more significant than merely nominating generic investment categories on an Investment Strategy template. As well as helping to craft the Investment Strategy document, the Adviser can also communicate all the relevant information to the Trustees including understanding their risk profile and recommending specific investments and insurance that suit their circumstances.
Changes in circumstances
Life happens. Death, Divorce and 6 member SMSFs. When these things happen, the Trustee needs more than just factual and compliance advice. Some changes in circumstances can have a big impact on an SMSF, they may even change the Investment Strategy or change the appropriateness of the structure altogether. An Adviser can provide the detailed advice required in these circumstances.
Structuring Benefits Payments
For a lot of SMSF’s pension payments are the only transaction that happens in the SMSF over many years. Whilst the Administrator or Accountant may ensure that the payment meets the minimum pension requirements, the Adviser can also guide the client in respect to Centrelink payments or aged care structuring. The Adviser can speak to the client and perhaps develop a strategy that considers benefits payments outside the SMSF and structure some advice that may put the trustee in a better position.
Insurance is such a large component of the SMSF Strategy so it make little sense leaving it with a professional that can’t recommend any changes or advise on its appropriateness. With the extension to 6 member SMSFs on the horizon the complexity of insurances within SMSF’s will increase and it is only the Adviser that can recommend and implement insurance advice. Another reason why it makes sense that the Adviser sits at the centre of the SMSF relationship.
Our experience as a wholesale SMSF administrator shows us that the simplest and best outcomes happen when an Adviser is helping trustee’s navigate their SMSF journey. With change to things like Investment Strategies and the number of SMSF members, we believe that the Adviser’s role will be vital to help trustees utilise their SMSF in the way that best suits their circumstances.
Keep it Simple Super works with Financial Advisers to help them provide SMSF Services to their Clients. Using our SMSF Administration engine, they no longer need to manage multiple relationships with Accountants or send their clients away to an external Accountant.
Find out more here.