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SMSF hype attracting ‘unsophisticated’ investors
Market hype around the SMSF sector is attracting investors who are “unsophisticated”, with some under the impression that an SMSF equates to better performance, according to Intelligent Investor Super Advisor.
The poor performance of some super funds in the wake of the global financial crisis has made SMSFs an attractive option to investors who may not have the appropriate levels of education, managing director of Intelligent Investor Super Advisor Richard Livingston told SMSF Adviser.
“Being angry and ending up getting a worse performance yourself isn’t really going to make you feel any better,” Mr Livingston said.
The Australian “love affair” with property is also attracting investors, with many believing that property is not a volatile investment, Mr Livingston added.
“In actual fact, that’s an incredibly undiversified and risky strategy. You really don’t need a whole lot to go wrong to end up with a very bad result.”
Mr Livingston claimed there is a “massive lack of engagement” generally between Australians and their superannuation, although he said that generally, SMSF members are “far more engaged than the average super fund member”.
“I think the dangerous area of SMSFs is those people who basically have been convinced by someone to move across... They sat down with a financial adviser or some other form of product salesman and had been convinced that the SMSF is the way to go,” he said.
three cheers for Barbara & Ed!! > the most qualified professionals whose comments and astute awareness of the big picture is like smelling roses or even better jasmin> thank you Barbara , such a relief you are still in the loop> please don't retire until the Govt get's it right!0- The reason ... Misplaced .. Is because their respective accounts recommended them to have a SMSF.0
- Some investors use WRAP services, some don't, some invest in real estate others choose not to. It appears that your family members and my friend's decision to use an SMSF differs from yours for a variety of reasons.0
- Barbara and Ed,
My friends and family members (and your friend) could invest in the Super WRAP version of the non-super WRAP they hold in their SMSF and also -
"have control of their investment and know exactly what they are invested in and what they are earning"
and save themselves compliance obligations / accounting and audit costs / etc...noting that the admin fee associated with a non-super vs super wrap is close to the same.
There is one SuperWRAP service that charged a flat (regardless of super balance) admin fee of $1500pa...which covers:
Trustee
Accounting
Admin etc
Why (unless holding real estate) would you go for a SMSF vs such an option ???
Cheers0 - We fully agree with your comment that some clients need SMSF and many don't. In respect of your family members they have control of their investment and know exactly what they are invested in and what they are earning. This is not the situation when investing in 'balanced' or 'cash' etc in a large super fund. The main thing is that they have sufficient in the SMSF to warrant this approach. We have a friend who used this straightforward approach. She also has an industry fund account. Percentage wise she netted 50% more in the SMSF than in the large fund.
Each situation is different and therefore the decision to establish an SMSF needs to be evaluated properly. We advise against SMSF in our book where it is not right for the situation or the individual's lack of knowledge, attitude or low amount involved.
Horses for courses!0 - Barbara and Ed, very true (in terms of property can be a good investment just like shares and bonds etc)...except that superannuation is not SIMPLE...and SMSF and the obligations (even after outsourcing to advisers the client/member is responsible for the compliance of their fund) of a SMSF are not insignificant.
I know of at least two friends / family members with a SMSF recommended by their accountants...holding via a non-super WRAP...managed funds and TDs...why is a SMSF appropriate here ?
Lets all appreciate that some clients need SMSF and many don't.0 - Property is an asset that can be a good or bad investment as can direct shares and managed funds. All can be held personally as well as in any investment structure including an SMSF without being the need to be 'sophisticated', so whats the point being made? A simple approach (if you don't understand it don't invest in it) with some diversification is a good approach that works well. We have just released our new book Keep It Super Simple - creating wealth for life in an SMSF that explains our KISS approach. Our aim is to assist new and existing SMSF members to avoid the pitfalls that can arise from any undiversified and risky strategy.0
- You presume too much Mr Livingstone..
Because "Being angry" and getting a hugely improved performance myself has made me feel sensationally better, - thanks for your concern...0 - I think all the article is attempting to say is that many SMSF are SOLD (be they by accountants, Financial Planners or the mate at a BBQ)to clients who really don't understand them nor need them.
I have no issues with SMSFs (when appropriate)...but get concerned that they become the only solution for many clients when other less expensive options have a lower compliance burden and complexity.0 - The reference to 'other form of product salesman' was to real estate spruikers and the like.
Not all financial advisers are equal and some do work on convincing as many as possible that a SMSF is the way to go, whether they are an ideal candidate for it or not. A financial advisor working for a large financial institution is hardly in the business of telling people to stay away from the products they're offering.
This is not to say that all financial advisers work on this basis.0
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