In an ever-changing investment landscape, it can be hard to know when to seek professional advice for your SMSF.
Life events tend to be a catalyst for when many self-managed superannuation fund (SMSF) trustees start to think about seeking professional advice, according to Greg Newbury, a director of Sydney-based Accru Financial Planning.
Estate planning and inheritance are occasions which tend to lead SMSF trustees, who might have previously avoided seeking professional advice, to reach out for help, Newbury says.
After opening a conversation with an SMSF trustee about how a fund might transition following a death in the family, trustees and fund members are often shocked about some of the other aspects of the fund which need attention, Newbury notes.
Many funds for instance haven’t made themselves “inheritance ready” in line with legislative changes starting on July 1.
One common mistake is funds haven’t evenly distributed balances between spouses making the most of super contribution caps, he explains.
“New clients we see who are close to retirement are often quite shocked by how unprepared they are,” Newbury says in conversation with SMSF News.
“There’s nothing worse than seeing a new client on the eve of their retirement seeking advice for the first time, when they really should have been seeking advice and preparing for that event for much longer than that,” he says.
SMSFs using financial planners is up over the past year according to the AMP Capital SMSF Survey of over 650 SMSF trustees – from 29 per cent to 45 per cent. However, SMSF trustees engaging a financial planner still trail the percentage of those (49 per cent) who engage an accountant for advice.
More SMSFs within this group are saying they have unmet advice needs compared to a year ago – 63 per cent of funds say they have unmet needs compared to 59 per cent the same time last year. Inheritance and estate planning is the top unmet need – according to the survey – followed by retirement strategies and income generation.
While estate planning and inheritance can often act as a bit of a “gateway” conversation for SMSFs into broader financial and investment advice, self-directed investors with their own SMSF might not be aware of some of the shortcomings in their investment strategies.
Self-directed investors are at risk of becoming increasingly short sighted with their investment approach, Newbury notes.
“With all of the noise in the media and the various ways to see how your portfolio is tracking in real time, I think a lot of people have forgotten superannuation is a long-term investment,” he notes.
SMSFs tend to hold more direct shares and higher cash balances than average investors, the research shows.
Indeed, because of their direct shares bias, most SMSF trustees will consider a well-diversified portfolio to be spread across sectors rather than asset classes, the research highlights. This means that they are not diversified and in fact may require advice to ensure their asset allocation aligns with the fund’s investment strategy, set out to ensure members can achieve the retirement lifestyle they set out to achieve.
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