The number of self-managed superannuation funds (SMSF) in Australia continues to grow as people set up their own funds and take control over how their money is invested for retirement. They are willingly taking on the role of a trustee with the awareness that this control comes with the responsibility for making all the investment decisions.
This is a role that should not be undertaken lightly, and trustees should do their own research before they take the first steps to set up the fund. Many people who consider this step assume that any professional organisation that advertises SMSF services is also able to give financial planning advice. However, this is not the case.
The role of companies such as SMSF Assure is to arrange the establishment of the fund, making sure that every requirement of the ATO (Australian Taxation Office) has been met in the process. They also manage the ongoing administration on behalf of the trustees, which includes meeting reporting deadlines and all other relevant compliance issues, but they do not provide financial product advice.
To provide such advice to an SMSF trustee, an organisation must hold an Australian Financial Services Licence. There are specific, ongoing obligations attached to holding this licence, including compliance with financial services laws. This is just one of many others.
This is an important difference for trustees to understand, especially as they are still responsible for the decisions made on behalf of the fund. This applies even if they have sought and followed the investment advice of one of these licensed professionals.
The fund trustees are responsible for establishing an investment plan for their SMSF when they first set up the fund. This is the point where they make the first of many decisions that will determine the financial circumstances of the fund members when they retire.
Having a well thought out investment plan helps them make those decisions, not only at the outset, but also throughout the life of the SMSF. The plan must be reviewed at least annually to keep it current and responsive to market variations and changes in the life circumstances of its members.
Some trustees are very knowledgeable about finance and investment, and have the confidence to make these decisions without seeking outside advice. For those who are not, the first decision they usually make is to engage a reputable company such as SMSF Assure to help them manage the administration and compliance. Their second decision is to choose a licensed financial services professional to work with them on an investment strategy.
Like any good decision-making process, they then need to:
- Gather information, review, analyse and check for accuracy;
- Discard what is not relevant;
- Use what remains to make a short list of companies that will suit their objectives;
- Do further investigation including making appointments to meet key people in the chosen companies;
- Do a final review incorporating any new information; and
- Select the company they believe will give them the best result in building the assets in their fund.
There is no magic formula to creating a successful SMSF. It is a serious undertaking requiring cool heads, financial knowledge and the clear, long-term goal of a financially satisfying retirement income.