The performance of any superannuation fund will eventually affect the quality of retirement that members will enjoy, so it is important that members monitor their returns. It is also worth considering the possibility that some of the products that funds have included in their portfolios are unsafe, exposing the members to reduced returns and eventually a diminished retirement lifestyle.
Just how safe those funds are, is a question worth asking. Provided you are checking that your employer is paying the required contribution to your chosen fund, and that fund has competent managers who have diversified the investments in high-quality products, there should be little to worry about. Throughout the GFC, superannuation funds experienced reduced returns but were never in real danger of collapsing.
This does not mean that such a thing could never happen, but in our highly regulated superannuation market, warning signs would be expected and acted on by fund managers. However, if you are the trustee of a self-managed superannuation fund, and you were either unaware of typical financial indicators or chose to ignore them, your funds and those of your members could be at risk.
Bear in mind that many of the protections available to other superannuation funds by the APRA (Australian Prudential Regulation Authority) are not applicable to SMSFs. For example, they are unable to claim compensation if their fund is affected by fraud or theft. SMSF members also do not have access to the Superannuation Complaints Tribunal if they are not happy with where their funds are being invested.
This is one of the reasons why an SMSF must have an investment strategy. It must be in writing and subject to regular reviews to ensure that it is meeting the needs of the members. This is particularly important when the financial and investment markets are in a state of flux. Without a proper strategy, trustees may be tempted to make quick, unwise decisions to recover losses rather than wait for market corrections.
The best way to keep SMSF investments safe is to develop an investment strategy with the assistance of a licensed financial advisor. The advisor should also be involved in the regular review, so that the fund trustee/s has the benefit of professional expertise. Licensed financial advisors must keep up to date with industry and market changes, and they share this information with their clients.
The other major issue SMSF trustees have is the administration and compliance involved. If you are a trustee struggling with the responsibility of running your fund, getting your investment strategy under control will be a load off your mind. Companies such as SMSF Assure are in the business of assisting clients with SMSF administration and compliance so with both of these areas covered, you are in the best position to keep your fund investments safe.