Podcasts
Gareth Lane
David Gardner
Ashwin Ramdas
Updated Dec 20, 2022
Mate Checked
This information has been reviewed by our SMSF Mates before it was published as part of our review process.
Welcome to SMSF Mate. Our general advice warning. We are required to warn you that any advice has been prepared without taking into account your objectives, financial situations or needs and because of that you should before acting on any advice consider the appropriateness of the advice having regard to your own objectives, financial services and needs. Where the advice relates to the acquisition or possible acquisition of a particular financial product you should obtain a product disclosure statement relating to that product and consider the PDS before making any decision about whether to acquire the product.
Tim: Welcome to SMSF Mates podcast. I believe this is episode four. I could be wrong but…
Gareth: We’ll go with four.
Gareth: Let’s run with four. Today, we are talking about SMSF’s minimum balances required to start one widely, fees and everything related. We’ve got a caller today. Dave’s called in. Dave’s got an SMSF.
Dave: I’ve pretty much just ignored my super for most of my life like probably 20 years. Then when the market crash happened back in March 2020 I felt like I needed to start paying more attention to it. I looked at the super fund and one of the reasons I’ve ignored it is because I had no control. I felt like I had no control over where it was being invested and so I had kind of ethical concerns around that and so just preferred to pretend that it didn’t exist. I had ideas of what I wanted to invest in. I looked at my current superannuation setups where I had like multiple super accounts with like various bits and pieces from various jobs. None of them I could really control more than like the level of risk that I wanted to have in the portfolio. I wanted to be able to try and diversify the assets a bit more across things like precious metals and have more control over what I invested in and where I invested the money.
I looked around and there’s quite a lot of articles and guidance online around and how much you should have as a minimum amount before you set up a self-managed super fund. I actually had quite a bit less than that minimum recommended amount but looking around I was able to find an online provider who had reasonably affordable fees compared to setting up through some of the other accounts and some SMSF providers that I found and gave me a lot more flexibility over the investments that I was making in the SMSF and because of that even though I didn’t have a huge amount of super to start with I’ve been able to see some reasonably good gains so far just by having a bit more control over the investments I’ve made and the level of risk. I guess it’d be good to know what you guys think about using an accountant versus using an online provider. How much you really should have as a minimum or how much you can get away with starting off?
Gareth: I think you sound like quite an astute individual. I think you should be in here. Ashwin?
Ashwin: There’s quite a bit to take from Dave’s experience. I suppose I would probably start with that first point you sort of said about the minimum balance within the fund like that’s generally guided by the principle of the fees needed to run a super fund, a self-managed fund versus the alternatives that are out there whether it’s an industry or a managed super provider. That’s ultimately what the guidance is. Now the self-managed you could reduce fees by you managing it yourself on the investment side but you’ve got all the compliance costs in there. It sounds like the online provider you probably got a lot lower costs versus someone that sees an accountant or a financial advisor to prepare their accounts for them or set it up.
Dave: It costs about a thousand dollars a year with a provider that I’m using.
Ashwin: That’s significantly cheaper than most funds. I think Moneysmart has a rough idea of what the pricing of a self-managed super fund running costs are. Obviously there’s probably investment fees and other things that provide within there and insurances and things like that you might need to factor in as well Dave but I suppose it also comes back to there could be restrictions in what you can do with an online self-managed super fund. There’ll be certain things that to keep that price low there might be certain investments you can’t partake in. It’s probably within the T’s and C’s or the trustee or the super fund to run you through that. Those restrictions might be detrimental or not what you’re looking for.
Gareth: That’s a really interesting point because you assume by doing self-managed super fund you can literally do whatever you want but what I’m hearing is that’s not true.
Ashwin: Look, there’s probably a vast majority of people that the self-managed online provider could be more than suitable for but there might be some things in there that you can’t partake in. There might be a restriction potentially on unlisted businesses that you might want to have a silent share in or investment in and you can’t do that within their fund because to keep that price low they might not be able to do those things but again you’d have to read through the PDS and obviously that provider and run through those questions with them but for vast majority of people those might be things you’re not interested in. You might like you said you can invest in precious metals and the shares you want to invest in if it meets the criteria that you’re looking for that’s self-managed for you. That’s fine. That’s going to suit your needs but it might not suit everyone.
Tim: I think in my experience when I was looking for an accountant, an auditor years ago some providers exactly what you said Ashwin won’t allow you to invest in certain things. You’re also restricted on the trading platforms that you can use. My experience was kind of around the more complex your investments are within the fund the higher the cost. Obviously that makes sense. Very limited. You could trade direct shares, some CFD’s. There was some flexibility there but property, commercial property, art, wine, all the good stuff.
Gareth: I think the real interesting one is that there’s a personal learning I have. I’m self-employed as well so self-managed, self-employed, self-everything is that you think that oh, I can just use my super fund to start a business but there’s all these very complicated laws around related parties. Correct me if I’m wrong here but I think there’s a 5% rule. 5% of your super fund or sorry no more than 5% of your self-managed super fund can be used for related interest but then something like a property that your business rents back off you and your property’s owned by a super fund I think doesn’t count for that.
Ashwin: There are certain exempt assets and commercial property being one of them but in-house asset rule with that 5% does affect a lot of people unless you’ve got millions in your super but I suppose you’d probably want to have a look at what you’re trying to achieve as well. Certain returns, if you justify it through your current structure Dave then it sounds like it’s probably working for you but when you find out there’s something you can’t invest in because of that platform you’re part of or that’s probably when you may make that move to update your deed and move across to another provider that can allow you to facilitate those investments. If it’s right now it works for you but you got to keep in mind there’s also some really cheap funds out there where the fees are next to nothing. That’s why the warning is there about fees with self-managed super funds is there are some industry and managed funds with really low fees.
There’s not a huge scope in what they’re investing in because it could be just an index, Australian index fund but if fees and you’ve got a low balance you’ve got to weigh that up versus paying a thousand dollars or two grand or three grand versus maybe you’re only paying 100 bucks. That’s all the stuff you probably need to do a little bit of fact-finding before you go down the self-managed pathway because we’ve had clients potentially set up a self-managed super fund. Realize it’s wrong for them and then close it down within a year and all the costs didn’t make any sense to do that but they should have spent more time researching or spending time going through it because they thought they were going to buy a property. Then they decided to get out of that and all of a sudden the self-managed super fund doesn’t serve that purpose anymore.
Gareth: I think another thing as well that’s a bit of a misunderstanding and this is again a personal learning example is you can still maintain your existing fund and have a self-managed super fund. You could put a minimal amount of balance in your existing fund and you could get your life insurance policy through that fund.
The other thing I find quite interesting is a lot of funds and investment products have minimum balances. For example if you want to invest in a particular fund you it might be in a fifty thousand dollar parcel or a seventy thousand dollar parcel. Then when you get your super paid through the year from your employer it doesn’t come in nice big 50 grand chunks. It comes in little bits and pieces here and there. If you had a default allocation to an industry fund that you get an immediate unit price, you’re in the market. Let that build up and then when it hits a nice round number you can then withdraw from that fund, move it to your self managed super fund and then invest in that product.
I think a lot of people seem to misunderstand the idea that you can have one or you have to have one or the other but you can definitely have multiple. Having sort of a generic and keep a minimal balance in there but use that as a way to be in the market while you almost kind of save up to move it to your primary self-managed super fund. I think that was an interesting learning.
Ashwin: That’s a good point there Gareth. I suppose the other thing is obviously the insurance side of things. If you’ve got a better insurance policy within your fund before you rolled it over it might be beneficial to keep that policy going and that’s what Gareth’s alluding to. It’s keeping that minimum balance in there to keep paying for that insurance policy and then at least you’ve got the coverage. That’s one of the things you’d go see a financial planner about before you go ahead and set up a self-managed super fund. I’m not sure if that online provider will do that for you whether they’ll do a statement of advice to let the pros and cons of what you’re moving through within. It’s about making the informed decision. If you’ve made that mindset there. Did they do that for you Dave?
Dave: No, I don’t think they do anything like that. It’s all very automated even for instance like at the end of the financial year so that the accounts can all be audited. You have to upload statements of holdings and everything like that. Then you have to manually reconcile everything into their system in terms of like money going into exchange accounts and things like that. Then any profits made and things going back into your bank account and that sort of stuff. It’s all I mean it’s quite basic and that’s an interesting point in terms of like starting here and then when you outgrow it considering moving on to like a different more I guess advanced funds or offering that has more options. I hadn’t really thought about but I feel like because I have coming into this without really having a lot of financial background. I think the simplicity of this has actually been good for me because it stopped me from getting overwhelmed and not doing anything because of that.
Ashwin: I suppose that’s a pro as well. As long as you’re getting that review and there’s maybe scope to get some advice but I suppose the insurance would be the thing that’s screaming out to me that you might want to review just for your peace of mind to make sure you had it adequately covered in case there’s loved ones and homeowners and other things like that you might want.
Dave: You can. They do have partnerships with insurance providers. I haven’t actually shopped around to see if there’s better options but you can definitely get life and TPD and income insurance through them as well. Actually back to Gareth’s point just before I know somebody I was talking to a while back who has set up an SMSF but kept their previous fund with only a very small amount in it because they have a chronic illness and through the old fund they had good insurance but they wouldn’t have been able to get insurance through the SMSF because the chronic illness had developed like during that time.
Ashwin: That’s one of the key parts before people close funds down is the insurance policies might actually be better in the existing fund. It’s always worthwhile. That’s why…
Gareth: Economies of scale. Some of the big industry funds have millions of members.
Ashwin: There could be great policies. There could be bad policies but that’s where you engage someone that’s actually going to read through that PDS and run you through that. If you’re like me even though I’ve got some around the space I still engaged a financial advisor to do that for me simply because I don’t have time to read through that whole PDS to see what exclusions there are, what loadings would be there and whether it should be worthwhile to keep it. I think those are the points and that’s where financial advisors make their buck and keep an eye on you. It’s worth the money because if you’re going to go down this pathway of self-managed for the foreseeable future you probably want to make sure you’ve crossed your T’s and dotted your I’s.
Gareth: I think like as a again a misconception is that you can have a financial advisor do one particular area. You don’t have to give away the like Dave, you sound like you want to manage your investments. You can still do that and then you can have a financial advisor do the insurance part. I think I mean again me, personally I kind of had this understanding that you sign up for a financial planning service and they do your investments. They manage what they’re doing and so on and so on but you can definitely get advice in silos. You can continue to choose what you want to invest in but if you don’t know anything about insurance or TPD, total permanent disability insurance then you can get people who are experts in that part who are not interested in doing your investment choices. I think the whole idea of the self-managed super fund wording kind of makes you think you’ve got to do all of it yourself but it’s not necessarily terribly true.
Dave: I didn’t know you could do that. It’s pretty interesting.
Gareth: Good podcast. Top tip.
Tim: Moving along nicely. I have I guess and it’s a question that comes up a lot with self-managed super funds and starting a fund because there’s a lot of information out there which kind of gives you like a minimum sort of viable balance to do it. I mean do we have any thoughts on that and what’s the logic behind it.
Gareth: Could I have a shot at that answer?
Ashwin: All right.
Gareth: This is a very simple thought. I think Ashwin would agree that the minimal cost to have a self-managed superfund would be about a thousand Aussie dollars a year.
Ashwin: I would say that’s under.
Gareth: Under so just to make the math easy let’s say a thousand. Now if you’ve only got ten thousand dollars to invest and you’re spending a thousand dollars on fees per year. That’s 10% so your fund would have to be increasing by more than 10% per year just to pay the costs.
Ashwin: It’s probably not even just that as well like I’d say the costs are closer to two.
Gareth: Right so now you’ve got to hit 20%.
Ashwin: That might not factor in the investment fees in there as well.
Gareth: Or inflation.
Ashwin: What you’re really measuring is your out performance or your flexibility. That’s what you’re really going by because the other funds that you’re alternately investing in are going to have a return. If you’re comparing fees and fees self-managed super funds usually come out higher in running costs but there’s a flexibility with the investments or there’s things you can do that you can’t do outside. That’s what you’re weighing up. Now there are low cost options like Dave’s run through but there might be restrictions on what you can and can’t do there as well.
Gareth: But it’s not fifty dollars a year though is it? Even the lowest of the lowest cost would be a grand maybe two.
Ashwin: Well no. There are some funds out there that are…
Gareth: Self-managed funds.
Ashwin: Not self. The lowest self-managed super funds is the one I think that what Dave mentioned. I’m not particularly sure exactly what the product is but that sort of price point of a thousand dollars or 1100 to do your accounts and your audit would be really cheap. Now there are sometimes concerns with the ATO when prices are that low because how thorough is it. By what Dave’s telling me it may be because it’s all controlled through one platform. It reduces the risks of a non-compliant issue which is where some of the costs are to maintain to make sure those things are picked up on. I suppose you’d want to make sure the flexibility because there are really low cost options that generally will mirror an index. That might be perfectly fine for people sub 200,000 in super.
If you’ve got more than 200,000 that doesn’t mean because I think that’s roughly what it might be online is 250,000, 300,000, 200,000 might be what people advise. That’s roughly on that one percent running cost for a compliance but there are funds out there that are way below one percent. You’re talking point less than 0.1.
Gareth: You mean non-self managed fund.
Ashwin: So typical super fund. There are funds that will mirror an investment portfolio. There’s one that might just be index where it’s really low cost. You’re weighing up what got really low fees but I don’t have an exposure or diversity in investments. I don’t have direct control over what those investments are because I’m trusting the manager within that fund to do that for me but all your, like yourself describe yourself I’m self-employed, self-running. I want to take control. That’s fine but there’s a cost to do that but there’s a flexibility that comes with it too versus if you’re controlled within a fund you might be limited to an extent but you have the flexibility. Even some of those online providers now within the industry and managed space will have a self-direct portion but you might be restricting what you can invest depending on their APL or their guidance as well.
Gareth: I think what you’re effectively saying is…
Ashwin: There’s no set amount unfortunately.
Gareth: Without this being financial advice just throw that in there is you can make an educated opinion to say I’m happy to. If I’ve got a hundred thousand to invest and it’s going to cost me two grand a year. that’s two percent but I’m consciously saying I’m happy to pay the two percent costs because I know that I’m interested and I want the flexibility and I can make investments that I perhaps can’t in a normal fund but if you’re simply going to put a hundred thousand dollars into a self-managed super fund and then go and buy an index ETF and pay two percent for the compliance cost you’re probably better off just going and getting a hundred thousand dollar off the shelf super fund with the index.
Ashwin: I think the best way to frame it I suppose is to see an advisor because you decide to go through this process but lay out what your investment plans are. If you’ve done the research that you’re going to be self-managed you should know what you want to invest in to an extent. These are the type of investments I want to play with. Is there a platform where I can do that without a self-managed fund or with you as an advisor and what would be those costs versus self-manage and doing it yourself? Then you can weigh it up and then you’ll have a document that will provide some guidance to you on where you’re going because unless there’s a direct need to invest in something that you can’t do I personally wouldn’t have a self-managed super fund.
If I didn’t want to be part of the commercial property that we’re part of within our fund I don’t think I’d be in a self-managed fund. There are some unlisted investments I’m part of as well but I don’t think I would go down that path. I think it would overall would have meant we would have gone into an industry fund or a managed fund that suited our investment platform. I think you need to start off with what you’re trying to invest in and then if you can’t do that in a managed or an industry fund that gives you that then you start looking into the self-managed space and make sure it’s right for you. Then you can justify the fee because of the flexibility. It’s similar to like if you’re building a house you can get a builder that can just do the 3×2 or the 4×2 or you can pay a bespoke builder to do the I don’t know cigar lounge and whatever else you want in your house but it’s going to come with the cost.
The flexibility to choose those builders comes with a premium or a price to pay or you can go to an online provider that might give you the same flexibility at a cost basis but go armed with information to a financial planner and their role is to give you advice on what you’ve asked questions about. If you wanted a way up between manage an industry fund versus with a financial planner or with an online self-managed or your own self-managed they can give you a statement of advice that will give you that answer or give you guidance on that question. Then you can read that big document and then make a decision after that. Then at least you’ve gone in wholeheartedly into it. Now some people might see that cost prohibitive paying I don’t know three, four grand for that statement of advice but in my head that gets its return in year two or year three when you know you’re in the right structure. You’ve got the peace of mind this is for me.
Dave: Would that be tax deductible as well?
Ashwin: Generally it would be deductible within the fund potentially yes but you need to see your tax accountant to make sure that all of that lines up.
Tim: Just some context. High level your SMSF you’ve got some commercial property in there. Can you just decide to that?
Ashwin: It’s a commercial property that we’re part of. We pay rent to at commercial terms and that’s one of those exclusions from in-house asset test. We like the peace of mind that we are owners in our building and paying rent to ourselves. There’s multiple tenants within the office. We’re all part owners in the building. We don’t have a loan on it but we like the idea that we’ve got, it came through a business feeling as well as a return so we crunch the numbers to see if the return made sense because obviously it’s a super investment.
Gareth: And you’re an accountant.
Ashwin: And an accountant.
Tim: It helps
Ashwin: It does help but then we always wanted the flexibility of we’ve moved offices a few times and moving offices has its own cost, has its own detriment in terms of how much you would invest in a fit out or improving the place because…
Gareth: And the time it takes.
Ashwin: Yes. We found a place we think is our next 10 years at least.
Gareth: Dream office.
Ashwin: Dream office to an extent. Walking distance for a lot of places we want to go to. Well as long as we can work in our office given Covid but it’s still the space we’d like it to be. I think that’s the key part. If we didn’t have that drive I think…
Gareth: You bought that property via your super fund.
Ashwin: A little bit. There’s multiple investors within the property. We all own it. That’s why there’s some people that invested into the property that aren’t super funds. It could be someone’s family trust or their own name and they’re getting a rental return and they own part of the building. They made an investment decision that they thought it made sense.
Gareth: Okay interesting.
Dave: Can I ask a question?
Gareth: No, you cannot.
Dave: All right.
Ashwin: Far away though.
Dave: Let’s just like I’ve got a question you have say like half a million in your self-managed super fund. Fees for the SMSF aren’t really a concern in terms of like it’s much smaller than the one percent that you’re talking about before. Is there an argument for moving some of those funds into just a regular super fund just to diversify risk?
Ashwin: It depends.
Gareth: It’s a hard question.
Ashwin: I suppose if you’ve got, if there’s an investment. It comes back to the investment right? If you can invest that investment in the fund without having multiple funds you’re going to be saving costs but if you can’t get the investment you want within that platform well then you need to diversify because it’s part of your overall plan to diversify and you couldn’t do that within the context I suppose depends on what you’re trying to invest in Dave.
Gareth: It goes back to my point before is you want to buy a commercial property. You can’t buy one dollar units of a commercial property. Not easily anyway. You might buy a hundred thousand dollar property or a two hundred thousand dollar property. What I personally found is that all right say you’ve got your half a million dollars of money to invest you might put four hundred thousand of that into a fund and that fund accepts parcels in 100,000 units or 50,000 units. Then so what do you do with the other hundred thousand. Then in Australia you can put $25,000 per year into your super fund.
Ashwin: It’s a bit more than that.
Gareth: It is more. Okay, there you go but that doesn’t come in nice even chunks. For most people it comes in monthly or fortnightly or so and so. Every month you might have another thousand dollars to put in. You can’t then go and buy another thousand dollars of your property. You almost want a small fund or a share portfolio or something that you can buy very small units of something whenever you want to and then when that balance builds up. That’s my take on it anyway.
Ashwin: Well that’s one way to look at it I suppose. It comes back to that investment strategy you’ve got. You’re either rebalancing your fund, how often you want to rebalance it to match the mix that makes sense for you and again that stuff you can potentially engage a financial planner in the initial stages or that stage of your life to work out what risk profile or investment strategy you should have. Then you can mirror it in multiple different things. A self-managed super fund is just one vehicle out of multiple vehicles for your retirement. It just needs to make sense to you. It’s got to really be driven by that self-managed part of you and if you’re having multiple funds and there’s no purpose for the other fund it’s sort of in my head, it’s sort of deviating from well, really do you need a self-managed super fund if you’re going to put extra money into another fund that’s not part of your self-managed portfolio.
Tim: Is there an argument, sorry Dave. What about insurances is that to have insurances in the industry fund versus having it in there. Is there any benefit?
Ashwin: It will come back to a few points I think that’s come up so far. It depends on your medical history, what your current policy is and what’s available out there.
Gareth: And costs.
Ashwin: That’s what a financial planner will, that’s what a financial planner did for myself is do that comparison to go okay, this is what’s existing. This is what you can apply for now. These are the loadings because you put on some weight Ash. This is how much you could but that’s optional. That policy made more sense to go through it and my clarification was if I lose the weight does the loading go away. They said yes, you can be reassessed. You go through full medicals again but they will reassess you and go we can take off that loading but the policy I needed for my stage of life is I am eyeballs level in debt. I’m married with two kids. I need a peace of mind that we’ve got money there in case something happened to me that the debt washes away and Jody doesn’t need to worry about the house basically being paid.
Now the policy I had previously did not have the limits to go up to the level of cover I need. I need to look at funds outside of it. Whilst the insurance could have been better in the previous accounts they were never going to go to the limit that I needed. I could have had a hybrid and had kept that policy and kept the rest of it. In my mind mindset it’s easy just having one policy for simplicity side of things. Someone’s gone through the PDS, made sure the main things I want to be covered for are covered in there.
Gareth: You’ve got peace of mind.
Ashwin: Got peace of mind.
Gareth: You have exchanged money for peace of mind.
Ashwin: Yes and that’s through an advisor. Now I could have read through the insurance terms and try to get quotes and try to manage that myself but as soon as I’m in that rabbit hole for me. I’ve start feeling uncomfortable. This needs to be something else. It’s sort of like when you try to be handy at home or for me anyway. You try to be handy at home you realize I’m four holes into trying to hang a picture frame here. I think it’s a handyman to go.
Gareth: Next podcast we’ll do it at your house. I’ll bring my drill.
Ashwin: Just buy bigger picture frames and cover the holes. That’s the solution right but that’s what the guidance is. If you’re going down the self-managed pathway, if you’re feeling uncomfortable there are professionals around to help you through that.
Gareth: There’s a wonderful website as well called smsf.com.au.
Ashwin: There’s a website. They can provide some general advice.
Gareth: Some general advice. Good disclaimer. Thank you.
Ashwin: Yes but that’s the key part. Just go in there. I’m all for people taking control but as soon as a comfort level that doesn’t make sense for you. There are advisors to step into those places for you.
Tim: I think on that insurance front, I think having an adviser to me anyway personally that feels like value could be added. I don’t want to be reading through PDS’s.
Gareth: But I think go back to what I said before there’s a really, a common misunderstanding that you don’t have to get your financial advisor to do all of it. Dave, you sound like me. You’re interested in markets. You want to buy stocks and things. You want to buy precious metals. I’m interested in that part. I’m not a reader. I don’t like reading 500 page documents. You could get someone, who’s an expert to just, you engage them just to do that bit. You don’t have to hand over the keys to your investment planning strategy, whatever the word is.
Ashwin: Totally. The insurance is a specific thing you’d want a financial advisor in my opinion to go through simply because it’s not just the cost of a policy. It’s also they will know roughly the experience but claim so you’d ask your financial advisors have you had claims with that provider, how’s that experience gone. Those are the questions you’d ask your advisor in the statement of advice to come back to you. Then you’ve got a friend of mine okay, this provider provides claims most of the time because ultimately the insurance is great if it’s cheap but if they’ve got a bad history of paying out that’s going to scare me off because ultimately that’s the peace of mind is I want to know that I’m not here anymore.
Jody’s experience of doing the claim through, the financial advisor and that’s where people sometimes get misconfused like they go the financial plan is getting this commission on my insurance but he’s also there to handle the claim. You can imagine the feeling of dealing with the claim of someone who’s just passed away with the partner and then going paperwork. I’m going to deal paperwork and talk to XYZ to make a claim.
Gareth: In your hospital bed.
Ashwin: That’s probably the last thing you want to deal with. I think they earn their money. Rightfully or wrongfully people can make their decision but in my mind I know my wife. I know that she would not want to be doing anything remotely in that space. Even me, like if something happened, we’ve got two kids. I’m not going to sit there and try and fill out claims. Call people up and try and follow that up as much as I know I could probably manage. It’s not foremost on my mind to do that.
Gareth: Sorry Dave did you have a question before half an hour ago.
Dave: No, it’s great. I guess one question that does come to mind is like based on all this if somebody does like say someone in my position two years ago don’t look at whether SMSF is a good option. They do all the research and they decide actually no, it’s not a good option. How do you actually find a good regular super fund because…
Gareth: Can I answer the first bit of that really quickly? This is Gareth digital marketer day job speak. First rule is don’t believe everything you read on the internet. I think the internet and Google in particular becomes like Dr. Google. People type into the search engine do I need a super fund or do I need a self-managed super fund. What a lot of people who are not in digital marketing wouldn’t understand is most of the content that ranks on the first page is either paid advertorial or construed in such a way to be advertorial. Basically advertising so that it paints a particular picture in the reader’s mind to take them down a journey and a process and a pathway that ends in them parting with money to pay someone to do it.
That really was the whole premise of setting up this website called smsfmate.com.au. The reason why we’re volunteering to do this podcast today because there is so much misconception and misconstrued information particularly on the internet that has been written a particular way for a particular reason that usually isn’t perhaps the full truth or the all-encompassing information. I think what I really wanted to sort of mention there is don’t blindly read this stuff on the internet, source information from multiple people. Me, personally I went and met with two financial advisors. I spoke to my accountant. I kind of put it all together rather than just sort of going down and reading a blog post somewhere and then deciding yep, that’s for me and off I go. I’ll be quiet now but don’t believe everything you read on the internet.
Dave: That’s great.
Ashwin: I think David going by your experience if you were very clear on the things you wanted to invest in precious metals, whatever else was in your investment strategy those are the questions you come armed with when you see a financial planner and go well this is what I’d like to invest in. What platforms and what would be the costs and what are the pros and cons of available to me. From that that document really will sum up what those pros and cons are. You should be able to find an independent advisor that should be able to do that.
That’s part of what you’re probably looking for. If you go in with the clear directive of what you’re trying to achieve or what you’re looking to do it makes it a lot easier for a financial advisor to give you the advice document that actually spells it out for you and tells you these are things to look for and you would have been forewarned about the insurance side of things. You’re being forewarned about limitations in certain funds. It’s great to go in there with some research because that makes the job of a financial advisor better in the sense they have context about what you’re trying to achieve instead of trying to ask you your risk, profile work it backwards and trying to not guess but work out what your goals are.
If you’ve come up there and you’ve actually done some research yourself that makes it a lot easier because you’ll get a document that serves your purpose opposed to what might be serving the questions that come from that meeting. I think that’s my biggest tip to you is you seem like you knew everything you wanted to do. You just probably didn’t know what potential other options there were out there for you and it might be what you picked is exactly what would have been in the advice document but I’d like someone to validate my decisions when it comes to investment decisions for life or for a long period of time. That’s probably what I would have wanted but that’s me.
Gareth said he went through two financial planners, an accountant to come up with his idea. Some people will read the internet and make their decision but I think personal view is I’d want someone to validate my decision just to make sure I haven’t missed something major.
Gareth: You’ve got to own it. It’s in the name. Self-managed means self-owning. You screw it up it’s on you. You have to be someone who is comfortable doing that. I’ve never had a job. I’ve always been self-employed. I backed myself. I’m also a little bit arrogant. For me it was perfect. If I screw it up oh well move on to the next one. It’s all part of learning but I’m genuinely interested in it and always have been interested in it whereas I think a lot of people perhaps do it because they think they’re going to make a million dollars or something. You’ve got to be actively interested in it for 25 years. If you’re going to start when you’re 30 really you’ve got 25 years of doing it. It’s like reading a job interview and saying I want this job for 25. I mean of course you can change it but I think it’s not something you should start on a whim.
Ashwin: It’s perfectly fine to close your super fund at different points. We’ve got clients that some of them had set up funds. We purchased another accounting practice years ago. They set up funds during the financial crisis and they just wanted cash and fairly safe investments but when they’re not getting much of a return for the last year or two in their fund and they’re not willing to actively invest. Their mindset is we’re still going to keep cash because that’s how we are because we’re in our 70s or 80s it made sense to close their fund.
Gareth: Their self-managed fund.
Ashwin: Close their self-managed fund, take the cash, deal with Centrelink. Exactly the same. It’s still an asset. All the rest of it but now you don’t have all the compliance costs and you’re not paying accounting fees and audit fees that you don’t need. Now if you’re going to go into investment now because all of a sudden the interest rate isn’t returning what it is and you’re going to invest in other things to get your return. Well, it makes sense. This vehicle still makes sense to save you money or give you refunds or reduce tax or whatever it was but if it’s cash it’s not doing anything and it’s costing you accounting fees and audit fees. To maintain it, it starts not to make sense. Actively clients close their funds because it didn’t make sense. That’s also fine.
The vehicle might set you now Dave and it might not in five years’ time because you have a different outlook or you don’t have the time to manage your own stuff because your business or your job’s taking over. You don’t have time to manage the accounts. Perfectly fine to switch out.
Gareth: Did we answer the question?
Ashwin: Somewhere.
Dave: I mean it’s all really good information.
Gareth: You have got two very passionate people voicing their opinions over here. We have just got to remember we answer the question.
Dave: I guess the second part if you decide an SMSF or like if you talk to a financial advisor and they recommend that SMSF is probably not the way to go for you like what’s the best way to try and find like a good performing regular super fund.
Ashwin: I think that’s the question you ask in that in that meeting. Now there are lots of websites that will show you returns on funds but you’ve got to read the little bullet points as well. This is based on a balanced or conservative or high growth or whatever. It’s breaking. I’m not saying it’s breaking. I’m not the advertising guy. You’ve got to read through that and make sure that that investment strategy matches up with your investment strategy because sometimes some funds are saying that they might be balanced but when you look at their investment portfolio that balance is actually looking more like growth. That’s not really apples and apples. That’s apples and oranges. Now you’re starting to deviate from comparisons. Those are questions you ask your financial planner because part of their fact find or their process of giving you some advice is actually working out your investment strategy. Then you can see a, usually in the statement advice they should provide you a table where you can read that information in some sort of framework that you can make a decision from it Dave.
Dave: Great.
Tim: That’s it. All right. Well, that was great. Thanks for calling in Dave.
Gareth: Good podcast. I might self-issued gold star.
Ashwin: We might get you on again Dave.
Thank you for joining us. Once again if you’re interested in our waffle about self-managed super funds feel free to join us on smsfmate.com.au or search SMSF Mate in Spotify.
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