SMSFs and Finding an SMSF Advisor
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Why an SMSF Advisor Might Be the Right Choice For You
Finding the right SMSF Advisor can be a difficult challenge so it is important to be well educated in what to look for. Whether starting young or thinking about retirement options, Collins Mann SMSF advisors work with you to make well considered decisions to suit your specific needs.
- Understanding what an SMSF is and the kinds of individuals that can benefit from having one will assist you in making decisions about your own superannuation.
- Setting up and managing your own SMSF carries risk and responsibilities: be prepared, be informed.
- The idea of having your own SMSF might be appealing but you should only take it on if you are prepared to input both the time and money that it takes to keep the fund working for you.
- Even though it’s called a SELF-managed super fund, you don’t have to manage the day to day running by yourself.
What is an SMSF and Is It a Good Idea?
A self-managed super fund (SMSF) is exactly what the name would suggest: a personal super fund which is managed by the members of the fund rather than an institution. In this respect, SMSFs differ to industry and commercial super funds. When you are in control of you super account, you’re able to distribute and use the money that would usually be entrusted to a commercial or industry super fund in your personal SMSF. In short, it is you who decides what to invest in and what insurance to consider.
A personal SMSF is eligible to have up to four members, assuming they are friends or family. It would be unusual for an SMSF to have just one member as they usually serve two or more individuals. If you are a member, you are a fully-fledged fund trustee (or the director of a private company that you appoint to be the trustee) the responsibility of the fund comes back to you.
Although it is appealing to be in control when it comes to your money and your super, it is important to remember that maintaining an SMSF takes a lot of work and can have some risk associated with it. If you have researched everything that’s involved with establishing your own SMSF and you’re convinced this is the option for you, it might be time to seek out an SMSF advisor.
What are the Risks and Responsibilities Associated with Setting Up My Own SMSF?
Every member that belongs to an SMSF is given the responsibility of the fund’s choices in terms of investment and legal compliance. Should anything go wrong or be non-compliant, the blame sits on your shoulders.
The following are some of the responsibilities associated with running an SMSF.
- You are completely responsible for every choice made by the fund. This even includes a situation where you might seek out an SMSF advisor for professional help, or if a separate member chooses to make the decision.
- The investments you make might not reflect the returns you expect to see. Whatever investments you make rest in your hands.
- A key responsibility is managing the fund regardless of whether your situation or preferences change or not. An example of such a change could be a job loss or a recession.
- You run the risk of relational tensions having a negative impact on your SMSF should there be a problem between members or should a member pass away or become sick.
- There is no compensation or insurance against theft or fraud, which also means you will not be able to petition the Superannuation Complaints Tribunal.
- If you’re transitioning out of a commercial or industry super fund, there is the potential for you to lose insurance.
Collins Mann SMSF advisors work with you to make well considered decisions to suit your specific needs.
Committing to an SMSF is Hard Work and Costs Money
Whilst managing an SMSF can be rewarding, it is also hard work. Whether you seek help from an SMSF advisor or do it yourself, the ongoing management can be considerably time-consuming. You will require enough time to get the SMSF established and stable, as well as the time it takes to look after ongoing activities, including:
- reviewing and considering investments;
- establishing and carrying out investment strategies; and
- looking after the finances, keeping books, and auditing on an annual basis by engaging a fully approved SMSF auditor.
On average, it takes SMSF trustees 8 hours a month to manage their fund in a healthy way and to a reasonable standard. That equates to over 100 hours per year.
Additionally, the initial set-up and ongoing management costs have the potential to be significant. These ongoing costs should be kept in mind: investments; finances and bookkeeping; annual audits; advice on tax; legal advice; and financial advice.
A report in 2018 concluded that “the average operating cost of running an SMSF was $6,152”. The median cost was $3,923.
Next Steps from Here
Now that you have heard a little bit about what managing an SMSF will entail and you’re still completely committed to the project, it might be time to think about seeking professional assistance from an SMSF advisor. The team at Collins Mann, based in Brisbane and servicing clients across Australia, have the expertise to make this work for you.
Contact us today to have a chat about how our financial experts can assist you in your journey.
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On average, it takes SMSF trustees 8 hours a month to manage their fund in a healthy way and to a reasonable standard.