Self Managed Super Funds | Gary Weigh

Get Advice but do Your Own SMSF Research

16/01/2015/in Self Managed Super Funds /by Gary Weigh

In Gary Weigh’s experience as Principal Advisor at Gary Weigh & Associates, he sees a lot of people in SMSFs who clearly shouldn’t be there. Often, they are there because someone else has recommended or promoted the idea.

Gary believes that, “If you are not intending to invest in Real Estate property or Collectibles (e.g. collections of art, wine, coins, stamps, etc.) then there is not an immediate obvious need for an SMSF. You would have to seriously question your own motives for wanting an SMSF, or question the motives of the person recommending an SMSF to you”.

Gary knows from experience that the main reason why people want an SMSF is because they like the idea of control. He says that whilst in theory the SMSF structure does offer a lot of control in the areas of investment, estate planning and tax management, in practice, it generally doesn’t play out that way. This is mainly because most people aren’t experts in any of these areas so they simply don’t use their SMSF to its full potential.

When clients come to Gary’s financial advice practice with a problematic SMSF, the first problem he sees is that most funds don’t have a corporate trustee. This can disadvantage member-trustees later on in a variety of ways, including exposure to personal liability.

The investment problems he sees typically include a lack of diversification and investments that are too risky for the particular member’s risk appetite. In some cases, the investment portfolio is no more than listed shares, term deposits and managed funds, which don’t require an SMSF structure.

Gary adds, “There is always a temptation for SMSF practitioners to recommend an SMSF because that is their preferred business model; and the ongoing admin and compliance required becomes a very profitable source of ongoing work”.

Because there are multiple disciplines involved, including record-keeping, minuted decision making, accounting and audits, as well as ongoing advice and review, trustees become very tied to and dependant on their ‘team’. This make the client feel locked in and over time this can lead to dissatisfaction because the focus shifts to the amount of ongoing practice revenue rather than the client’s retirement goals.

So if your investment intentions don’t require an SMSF or if you are not keen to take on a lifetime of personal or outsourced compliance and admin, then think twice before committing to an SMSF. It will pay you to get a second opinion.

There are other forms of superannuation out there with varying levels of control that could achieve your retirement goals without all of the work and hassle.

To see the full range of advice services at Gary Weigh & Associates CLICK HERE

SMSF Investment – It pays To Do Your Homework

10/01/2015/in Self Managed Super Funds /by Gary Weigh

In my experience, the majority of Australia’s superannuation members are better off staying out of SMSF and choosing another form of superannuation.

If you are not hell-bent on buying direct property as an asset of your SMSF, then I would strongly encourage you to look at other options before jumping into a Self-Managed Super Fund. The same applies to the group of investments termed, ‘Collectibles’.

If you like to collect valuables like fine wine, stamp, art and coin collections, then perhaps think twice about doing it via an SMSF. The rules have become a lot tougher recently.

If you do your research, you will find that a valuation, adequate insurance and off-storage of collectibles are all mandatory requirements for Collectibles now. Just finding someone who can value your unique collection and provide cost effective insurance could itself be a challenge.

Before jumping into an SMSF, or being talked in to it by an advisor, I encourage you to do your own research or seek a second opinion from an SMSF qualified advisor who comes recommended to you.

Although the majority of trustees cite ‘investment control’ as their number one reason for an SMSF, in practice it rarely plays out that way. In my experience, most SMSF investors are fairly conservative and stick to what they know.

I think the reason is that just like anything else, the art of investing requires training and experience. Most DIY investors are lacking in both, so they tend to set and forget in the familiar options of cash, term deposits, managed funds and listed shares.

However, if you do your research, you’ll quickly realise that you don’t need an SMSF to access these types of investments. They are all readily available through what is called a retail superannuation ‘wrap’.

A wrap is a form of personal superannuation that offers different types of assets grouped together under the same administration and reporting platform. Although real estate and collectibles generally can’t be accessed through a superannuation wrap, there is still a high level of investment control.

Personal superannuation (including the super wrap) offers some significant advantages over the SMSF. These include:

• There is no trustee compliance and reporting responsibility for members.

• All fund administration, accounting and auditing is all taken care of.

• There is a wide choice of diversified investments and online access to your portfolio 24 hours a day, 7 days a week.

• The better funds pay ‘Anti-detriment Payments’ as an additional death benefit payment. An Anti-detriment Payment is effectively the return of contributions tax paid. (An SMSF can in theory pay it as well, but in practice it is rarely paid because of significant barriers to funding it).

• Members have access to the Superannuation Complaints Tribunal (SCT) to resolve disputes. SCT access is not available to SMSF members.

If you are in Brisbane and considering an SMSF, call me for a no-obligation chat about your particular situation.

SMSF Management – Is It Forever?

30/12/2014/in Self Managed Super Funds /by Gary Weigh

In my experience as Principal Financial Adviser at Gary Weigh & Associates, SMSFs are appropriate for some people, and many others find themselves in an SMSF for the wrong reasons, but regardless, what started out as an exciting journey of self-destiny, can become a large weight on trustee shoulders over time.

The reasons are simple! Trustee needs and circumstances change significantly over time, and here are my five (5) reasons why:

1. Some trustees grow older and slow down

2. Trustee focus shifts to more interesting retirement pastimes

3. Where one trustee is dominant, that person may lose interest or capability

4. Death, disability or illness interrupts the management process

5. The investments in the fund change to the point that an SMSF is no longer warranted

When you have been doing this as long as I have, it is not unusual to see a clear need to convert illiquid assets such as real estate property into cash or other investments that can be quickly converted to cash. It is a natural process as members continue to age and their circumstances change.

Although there can be a number of triggers, these are three of the most common:

• The fund needs to sell down assets in order to continue to pay pensions

• A member might have a need for cash to finance aged care

• Assets are sold down at an opportune time to take profit

I think that if the original need for an SMSF disappears (e.g. the major property asset is sold), trustees should not feel trapped in a structure that demands a lot of time in compliance and administration. It is possible, and often beneficial, to exit an SMSF transition back to personal superannuation.

I firmly believe that strategy is always determined on a case-by-case basis. Of course, there are good reasons for some clients to stay with the SMSF structure. For example, family business ownership is transferred to the younger generation, and the business premises is owned by the SMSF; or where SMSF longevity is being extended by adding adult children as members.

However, if this is not the case, and the original need for an SMSF has changed, I can tell you that there are some very good reasons why transitioning back to personal superannuation should be considered.

The advantages include:

• Members no longer have to bear the burden of trustee responsibility, compliance and administration

• Members of retail personal superannuation funds (at least the ones I recommend) pay anti-detriment payments. This is effectively a return of contributions tax paid in addition to an accumulated and / or insured death benefit when a member dies

• Members have access to the Superannuation Complaints Tribunal in the event of a complaint against the super fund.

For more information about SMSF and other retirement services offered by Gary Weigh & Associates, visit www.garyweigh.com/advice.

old man wearing a beret holding a glass of wine

Is SMSF Management For You?

26/12/2014/in Self Managed Super Funds /by Gary Weigh

In my experience, SMSFs are appropriate for some people, but they do not suit the vast majority of superannuation members. As Principal Financial Adviser and Director of Gary Weigh & Associates Pty Ltd www.garyweigh.com, I receive many client enquires asking me whether taking on SMSF management personally is something they should consider.

I cite three (3) reasons why the SMSF superannuation structure is not appropriate for the majority of people:

Although there is no magic threshold ‘balance’, most couples don’t have enough superannuation money between them to start an SMSF and run it cost effectively.
It is rare to find that all members of an SMSF have equal enthusiasm and / or required competence to take on trustee responsibility. Typically, one person dominates decision-making and management activity. This can cause problems when the active trustee is no longer able to manage.
Personal management of an SMSF is widely regarded as a chore, not a retirement lifestyle. Amongst an ageing member-trustee population, there are so many other things that most retirees would rather be doing.

I would caution that rather than dive straight into an SMSF, many people would be better off to opt for a personal superannuation solution in the short term; become proactive with their super, and put a plan in place to work towards the SMSF later on if that’s what they want.

Furthermore, I believe that if there is no real intention to invest directly into real estate property, then personal superannuation should be seriously considered. That way, the trustee responsibility, compliance and administration is taken care of.

I am still surprised that so many people are still unaware of the superannuation wrap. This is a type of personal super that departs from the traditional ‘managed funds only’ model. It allows investors a lot more investment control by allowing term deposits, direct shares and managed funds to be grouped under a single administration platform.

Even if people do want to invest directly into real estate property, or want control without the burden of trustee responsibility, a Small APRA Fund (SAF) should be a consideration. The SAF structure resembles the SMSF in every way except the trustee is an ASIC-approved commercial trustee company.

For more information about SMSF and other retirement services visit www.garyweigh.com.

General advice warning

The article above is general advice only designed to educate and heighten awareness of self-managed superannuation issues. It should not be regarded as personal advice, because it does not take into account your personal circumstances, financial situation or specific goals. For personal advice that is tailored to your needs, please contact me or consult your licensed financial adviser.

Seven Questions to Ask Yourself before Jumping into an SMSF

SMSF Management – Is it what you really want?

23/12/2014/in Self Managed Super Funds /by Gary Weigh

A lot of clients ask me about Self-Managed Super Funds (SMSFs) and whether taking on SMSF management personally is something they should consider.

They have usually heard that it’s a lot of work (because it is DIY super right?), and wonder if the work and worry are worth the benefits. My answer is this!

SMSFs are appropriate for some people but in my opinion, they do not suit the vast majority of superannuation members. I say this for three (3) reasons:

Although there is no magic threshold ‘balance’, most couples don’t have enough superannuation money between them to start an SMSF and run it cost effectively.
In my experience, it is rare to find that all members of an SMSF have equal enthusiasm and / or required competence to take on trustee responsibility. Typically, one person dominates decision-making and management activity. This can cause problems when the active trustee is no longer able to manage.
Personal management of an SMSF is widely regarded as a chore, not a retirement lifestyle. Amongst an ageing member-trustee population, there are so many other things that most retirees would rather be doing.

So for those who haven’t yet made the SMSF decision, there are two positive alternatives that are worth considering before committing to your DIY fund. They are:

A. If you are not investing directly into real estate but still want investment control

In my opinion, if you are not intending to use your SMSF to invest directly into real estate property, then I suggest you seriously consider personal superannuation instead; this is where the trustee responsibility, compliance and administration are taken care of.

Personal superannuation is a generic term for retail superannuation products, which allow you to tailor investments, insurance and estate planning benefits to your individual needs.

In my opinion, a lot of people are unaware of the superannuation wrap, a type of personal super, which breaks away from the traditional ‘managed funds only’ model. It allows investors a lot more investment control by allowing term deposits, direct shares and managed funds to be grouped under a single administration platform.

B. If you are investing directly into real estate property but don’t want trustee responsibility

Most people haven’t heard of a Small APRA Fund (SAF). However, an SAF resembles an SMSF in every way except that the trustee is an ASIC-approved commercial trustee company. By doing this, you can enjoy all of the member benefits of an SMSF without having to take on the trustee responsibility personally or doing the compliance and administration work.

Of course, there is a third option, which is to use an administration service (which I would recommend only with the guidance and support of a trusted financial adviser). But I have a fundamental issue with this option.

Whilst it makes sense for an existing SMSF whose trustees are no longer able to manage, why set up a new SMSF like this? After all, the ‘SM’ in the SMSF acronym means Self-Managed, so why set up an SMSF only to hand over the management to someone else?

Retail personal super achieves that with so many more advantages!

General advice warning

The article above is general advice only designed to educate and heighten awareness of self-managed superannuation issues. It should not be regarded as personal advice, because it does not take into account your personal circumstances, financial situation or specific goals. For personal advice that is tailored to your needs, please contact me or consult your licensed financial adviser.

a business man and woman looking at something from afar

What SMSF promoters don’t tell you!

31/10/2014/in Self Managed Super Funds /by Gary Weigh

It’s sad when I see a Self-Managed Super Fund (SMSF) set up because someone else other than the customer thought it was a good idea, and the advice given causes problems for the trustee-members involved. Inevitable, the people I see with SMSF problems are those either at or near retirement; and they are usually worried.

Promoters of SMSF are typically financial planners, accountants or (God help us) property marketeers, and their knowledge levels can range from very high to zero.

It is because superannuation itself can be complex and a SMSF adds an extra layer due to its DIY nature. As a result, most well-advised SMSF trustees need and receive advice in areas of:

Set up
Investments
Taxation
Administration; and
Ongoing management

Regrettably, advice in the best interest of the client is not always forthcoming where the client has been talked into a SMSF by an adviser with a conflict of interests. Advice misguidance occurs when the advice provided is tainted by the adviser’s own agenda.

Think about this:

Accountants are generally well-meaning but some simply don’t have sufficient depth of knowledge in SMSF areas outside their core expertise of tax and accounting, and a few are motivated by the prospect of adding a new entity to their annual fee base.
Despite the bagging financial planners get, most are honest hard-working advisers. For some, SMSF advice is core business and for others, it isn’t. It is important to distinguish one from the other. When I see a SMSF with problems, and an adviser attached, it is usually characterised by a cheap set up and investments that generally are way too risky for the member’s risk profile.
Property marketeers (God help us) just use the SMSF as a convenient vehicle to flog a property and the cash-flow & liquidity problems for the trustee-members don’t surface until sometime later. So never accept SMSF advice from the tame financial advisers at a property seminar. Talk to an adviser who is not influenced or being paid by the property promoter.

Read more about SMSF problems and SMSF scams at the ASIC MONEYSMART website https://www.moneysmart.gov.au/superannuation-and-retirement/self-managed-super-fund-smsf

Whatever the impetus for jumping into a SMSF, the quality of the setup of a SMSF is vital to its ongoing health. Setting up as cheaply as possible can lead to some very expensive remedial action later on.

It is no different to any other product or service. You get what you pay for! Having a cheap trust deed and members acting as individual trustees of your SMSF is certainly the cheapest way to go but it can unravel when the first member of a couple passes away, and could prove to be a false saving in the long run.

If you are in Brisbane and have a SMSF that is underperforming or you would like to get away from your SMSF provider and learn more about actually running it yourself, call me and let’s have a no obligation chat.

I don’t promote Self-Managed super, I fix problems in existing SMSFs. Also read my article “The SMSF Mechanic” at http://garyweigh.com/the-smsf-mechanic/

Gary

Gary Weigh & Associates Pty Ltd is a Corporate Authorised Representative (No. 256617) of Australian Mortgage and Financial Advisers Pty Ltd, Australian Financial Services Licence No. 389206.

General advice warning

The article above is general advice only designed to educate and heighten awareness of self-managed superannuation issues. It should not be regarded as personal advice, because it does not take into account your personal circumstances, financial situation or specific goals. For personal advice that is tailored to your needs, please contact me or consult your licensed financial adviser.

SMSF Review – Individual Trustees a Disaster Waiting

13/10/2014/in Self Managed Super Funds /by Gary Weigh

The majority of SMSF in Australia are estate planning disasters waiting to happen.

Why? Because the majority of people have avoided the expense of using a corporate SMSF trustee, and have chosen the cheaper option of setting up their SMSF with ‘individual trustees’.

As you are probably aware, a SMSF can have up to four members, and all of the fund’s members must be trustees. There is a choice of trustee structure. Members can choose:

To act as individual trustees; or
To act as directors of a company that acts as corporate trustee.

The problem arises in two member funds with individual trustees (which would be the majority of SMSF in Australia) when one member dies. A SMSF cannot operate with only one individual trustee.

The reason it’s not permitted is a legal trust relationship cannot exist with only one person involved. A SMSF with individual trustees is required to have at least two trustees to operate. So it means bringing in a second trustee. In some family circumstances, this can be a problem.

Depending on who the person is, bringing a new trustee into the fund to replace a trustee who has passed away can upset the balance of SMSF control at trustee level, with the potential to send a couple’s original Estate Planning into a tail spin.

On the other hand, if a company is the trustee, it can continue to operate with one director only. The advantage of a corporate trustee is that when the first death in a couple occurs, SMSF management and control stays firmly in the hands of the surviving spouse and the Estate Plan can stay on track as originally intended.

Just another note of caution!

If you already have a company for another purpose, don’t rush into to using it as the corporate trustee for your SMSF without first seeking advice. That could create more problems than it solves.

So if you are an individual trustee of a 2-or-more-member SMSF, please raise the level of urgency for a SMSF review to high. Call me and I will fix the problem for you. It is not difficult to do, but it is time consuming to change the name of the trustee on all of your investments. However, it could save you a lot of money and heartache down the track.

Gary

General advice warning

The article above is general advice only designed to educate and heighten awareness of superannuation issues. It should not be regarded as personal advice because it does not take into account your personal circumstances, financial situation or specific goals. For personal advice that is tailored to your needs, please contact me or consult your licensed financial adviser.

SMSF Review – No Estate Plan?

07/10/2014/in Self Managed Super Funds /by Gary Weigh

Most clients I see for a SMSF review have not done much about Estate Planning.

Estate planning means making a plan for the distribution of everything you own and control when you die.

While most people I meet have been meaning to get around to it, they haven’t taken action. I understand why because it is a complex area, and sometimes it is hard to know where to start.

Estate planning is more than just having a Will. Your last will & testament only deals with money and assets that are owned in your personal name. Whether you realize it or not, you probably have other assets within your control that can’t be dealt with directly by your Will. There are separate strategies for these. They include:

Money & investments held in superannuation, including your SMSF
Life insurance policies
Jointly owned property (e.g. your home)
Money and property controlled in a private company or trust

Whilst you can’t put your home in your SMSF, it is common to draw some of the other common elements of your wealth together into your SMSF such as money, investments, property, life insurance policies and business premises.

And there is a reason for this!

One of the lesser known advantages of a SMSF is the protection it offers as a vehicle which can carry and distribute family money and assets from one generation to the next.

I can’t emphasise enough how important estate planning is as part of a SMSF review.

This protection is not only effective against those you love the least, like creditors and those who want to sue you, it is also effective against potential risks arising from family members you love the most.

I know that sounds really strange, nut here’s an example.

The last thing you want is for hard earned money to be squandered by a child with a drug or gambling habit, or be taken by a child’s departing spouse as part of a divorce settlement. That can happen if you don’t get it right. And I can tell you now that a simple Will won’t cut it.

Also if you have a child who can’t fend for themselves, for example a child with a disability or a spendthrift child, you can set up the means to provide for that child for life, long after you’ve departed this world.

However, it is essential that all of these arrangements be put into place while you are alive and still have your full mental faculties to make such decisions.

This is the heart of estate planning!

Call me for a SMSF review and get your SMSF working for you as the inter-generational wealth vehicle it should be.

Gary

General Advice warning

The article above is general advice only designed to educate and heighten awareness of self-managed superannuation and estate planning issues. It should not be regarded as personal advice, because it does not take into account your personal circumstances, financial situation or specific goals. For personal advice that is tailored to your needs, please contact me or consult your licensed financial adviser.

The SMSF Mechanic

02/09/2014/in Self Managed Super Funds /by Gary Weigh

About 12 months ago I received a phone call from a distraught man whose superannuation was controlled totally by his adviser. He was referred to me by an existing client on the basis that if I couldn’t help him directly, I would know someone who could. He had so little information and so few records, he was almost in tears as he admitted that he felt like such a mushroom and didn’t know what type of superannuation fund he actually had.

It turned out that he and his wife, both in their mid-sixties, had a Self Managed Super Fund with significant problems which were causing them a lot of heartache and stress. That was the day I became the SMSF mechanic! Since then I have been referred to many people with Self Managed Super Fund problems.

There is no doubt that Self Managed Super Fund is appropriate for some people but a SMSF is definitely not for everyone. There are a lot of people out there who have a SMSF because someone else thought it was a good idea.

If this is you or is you can answer YES to any one of the 5 questions below, it will pay you to call me for a chat or a second opinion.

Q1. Have you lost money as a result of bad advice or unscrupulous operator?
Q2. Do you think you are paying too much to an adviser or administration company?
Q3. Were you sold real estate property via a SMSF by a property marketeer?
Q5. Does your current adviser have total control of your fund and tell you very little?
Q6. Was your fund set up for you and now sits idle and does nothing?

Don’t risk your retirement. Contact me now and let’s talk it over. There’s no obligation and if I can’t help you I won’t charge you.

Gary

Gary Weigh & Associates Pty Ltd is a Corporate Authorised Representative (No. 256617) of Australian Mortgage and Financial Advisers Pty Ltd, Australian Financial Services Licence No. 389206.

General advice warning

The article above is general advice only designed to educate and heighten awareness of superannuation issues. It should not be regarded as personal advice because it does not take into account your personal circumstances, financial situation or specific goals. For personal advice that is tailored to your needs, please consult a licensed financial adviser.