SMSF’s … are they right for me?

For the 650,000 or so SMSF’s in Australia, 2020 threw up some serious challenges.  Just as we had put the franking credit debate to rest, along came the coronavirus and a near 40% plunge in the markets, with dividends being slashed. At the same time, cash and term deposit rates are next to nothing and income from investment properties is under stress as well. 

2021 has seen a much-welcomed return to form in the markets and SMSF trustees have breathed a small sigh of relief. 

It’s not surprising that trustees have indicated they are feeling under stress and are questioning market conditions for the remainder of 2021 and beyond. 

The recent upheaval has also seen some trustees make drastic changes to their portfolios, mainly around their asset allocation.  The 2020 Vanguard / Investment Trends SMSF Report surveyed a large number of trustees in relation to their response to the COVID pandemic and how they were positioning their portfolios moving forward.  

– The report highlights that the number of SMSF’s being established is slowing considerably.  This has been mainly due to the frustrating amount of red tape and complexity forced upon trustees by the regulators.  

– That said, trustees overwhelmingly indicated that the desire to ‘take control’ of their retirement savings was the driver behind the establishment of an SMSF.  

– Interesting too, is the fact that SMSF’s have been disengaging from proactive financial advice and as a result, we have seen non-advised trustees ‘freaking out’ at the height of the SMSF pandemic but despite these high levels of concern, only a very small percentage retreated to cash holdings alone.  

– Some trustees have taken a more aggressive approach to their investments and see the opportunity and better equity value that the market correction has provided.

Self Managed Superannuation Funds are not for everyone!  There is a high level of time, interest and knowledge that is required to manage an SMSF.  The legal responsibility for the conduct of the fund and the ability for the fund to meet the ever-changing legislative requirements rests squarely with the trustee.  Whilst there are many benefits of holding retirement savings in an SMSF structure, unless the trustee has expert knowledge regarding investment markets, market risk and the everchanging legislative landscape, they need to surround themselves with professionals who specialise in SMSF management from both a taxation / administration point of view, but also from an investment and strategy advice perspective.

To review your SMSF from a fresh perspective and gain an insight into the current landscape, contact our specialist SMSF advice team on (07) 3371 0866 to discuss your situation.