If Investing in SMSF, Create a Vision

In my experience as Principal Advisor at Gary Weigh & Associates, many people don’t have a clear vision for their SMSF before jumping in. The overriding need for control over superannuation is not enough. It is important to understand why the need for an SMSF exists.

As an experienced financial advisor, I can tell you that in some cases the need exists because an accountant or financial planner suggests it does. It depends on the advice provider’s motivation because an SMSF recommendation can also mean years of ongoing SMSF service work which can be very profitable for the advice provider.

But regardless, I encourage anyone heading down the SMSF track to do their homework and satisfy themselves that significant need exists that an SMSF will satisfy where no other form of superannuation can.

Start by asking the following questions of yourself and / or the person who recommended an SMSF:

1. Do you have a special skill as a trustee, administrator or investor?

2. Is the prime purpose to acquire your business premises?

3. Is the prime purpose to purchase residential real estate?

4. Is the prime purpose to invest in Collectables (e.g. collections of art, wine, coins, stamps etc.)?

5. Are you aware of the SMSF rules pertaining to real estate acquisition, limited recourse borrowing, collectables and restrictions on investment?

If your answer is NO to all of these questions, I can’t see a strong need for self-managed super and you may be better off staying out of an SMSF and choosing another form of superannuation.

So for example, “If the purpose of your SMSF is to invest in listed shares, term deposits or managed funds, you don’t need an SMSF to do that. It can be achieved with a superannuation wrap”.

Furthermore, even if you answered YES above, and do intend to invest in mortgaged real estate property, ask yourself the question, “Is it really worth taking on trustee responsibility, setting up three separate entities, incurring additional legal costs, and years of ongoing admin and compliance, with no ability to improve the property, just to acquire a real estate investment that may be eligible for a tax break?”

The majority of people are not expert property investors and simply want to have enough money for a comfortable retirement. So I encourage prospective SMSF trustees to have another look at personal superannuation.

From experience, I can confidently say that with good investment advice and a reasonably priced administration platform, personal super can deliver investment performance and control at a reasonable cost is very achievable without all the work and hassle of an SMSF.

For more information about SMSF and other retirement services visit http://garyweigh.com/advice/