Is your SMSF underperforming?
Self-managed super funds can be an important tool for any business even if they’re not supporting commercial premises. They are critical for wealth generation generally. So remember that it’s one of your key assets and needs to be handled carefully.
A recent report by the Productivity Commission found that SMSFs were performing terribly in Australia.
In the year ending 2015 SMSFs returned only 6.2% on assets meanwhile standard APRA approved funds returned 8.9 % for the same year.
And in December 2017 Super guard 360 found that in every time period between one and ten years, the average SMSF investor earned less than the average industry and retail fund member. Even the most basic default fund member who had no choice about where their super was being invested was earning more.
To put this into figures, SMSFs returned 10.2% in 2017, 7.6% from 2012 to 2017 and 4.4% from 2007 to 2017. Compare this to default funds who returned 12% over a year, 7.8% for dive years and 4.6% for a decade.
All this adds up significantly. It means investors are not getting the full value for their investment. And if you’re a small or medium business, every cent counts.
So what's the reason that SMSFs aren’t always doing so well?
Quite simply. SMSFs are getting the wrong advice and are investing in the wrong areas. SMSFs cost a lot to set up and if the structure isn’t good then you’re not going to have a great set of returns.
Think of an SMSF as like a house.
If you design it poorly, with bad foundations, and the wrong kind of materials it will keep costing you in maintenance and repairs. In the same way that ATB works closely with small business to create a financial blueprint for the future we can also give you strategies and advice to set up your SMSF in the right direction.
So it all comes back to the advice that businesses are given. Here’s another crucial point. In June 2018 the Australian Securities and Investment Commission found in a survey that 90% of financial advisors gave their clients poor advice when it comes to SMSFs. In fact, in 19% of cases, the clients were at risk of losing money and in 10% of cases the clients were likely to be greatly worse off in retirement due to the advice. Let’s put that in perspective: 9 times out of 10, in Australia, self managed super funds are built on bad advice. Little wonder the industry is performing so poorly.
It’s not just the advice that’s the problem. In an online survey with 457 consumers, ASIC found that 38% of those they talked to found running an SMSF far more time consuming than expected. 32% found it far more expensive than they’d thought and 33% didn’t know that by law, all SMSFs must have an investment strategy.
This shows that many people entering the SMSF world are coming in with little knowledge or understanding about SMFS and then are getting terrible advice and poor financial strategies. This creates a potent recipe for disaster.
Come and talk to us about ways to set up your SMSF
Yet it doesn’t have to be this way. Super funds can be a powerful tool to help grow your business. So if your super fund is underperforming or not doing as well as industry funds, the chances are that the structure and strategies aren’t set up to get you the best possible returns. The world of SMSFs is highly complex, exhausting and demanding. SMSFs are essentially a whole another business to manage.
So if you’d like to know more, do get in touch. While we are Parramatta based accountants we cater for businesses anywhere. We can help you set one up or manage your existing fund and advise on what financial strategies to put in place.
This means you take control of your business again. Also you can be confident that in your overall wealth strategy SMSF is delivering a key part of your strategy for both your business and your retirement.
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