Knowledge levels need boosting

This ever-changing environment should, in theory, make the appeal of running a self-managed super fund (SMSF) more appealing, considering most individuals choose this type of fund to have both greater control and flexibility.

But challenges come with new legislation too. Take for instance the ability to use gearing in your super fund.

While the take up of limited recourse borrowing arrangements (LRBA) has not been overwhelming, it is no doubt an area certain entrepreneurial types have been looking to exploit. The recent Australian Securities and Investments Commission’s notification of a crackdown on LRBA spruikers is evidence of this.

In the context of this changeable atmosphere, and its consequences, increasing emphasis must be placed on lifting knowledge levels among SMSF professionals and trustees.

The more expertise financial planners and accountants can demonstrate to their clients, the better value proposition they can establish to help build a bigger book of SMSF customers. Considering SMSF trustees are more under advised than the greater population, this would go some way to addressing this situation.

Following on from this, trustees need to raise their SMSF knowledge levels too considering the large majority currently are reluctant to seek advice.

It stands to reason the ability to take advantage of the flexible nature of an SMSF all depends on knowing how to use the existing parameters to one’s advantage. Better knowledge will also afford better protection against opportunists due to a resulting heightened sniff test instinct.

The economy is also throwing up its own challenges for the SMSF sector. Research into SMSF portfolios show a consistent bias toward domestic equities, property and cash.

As the economy slows and interest rates come down large cash holdings may preserve capital but will not generate the type of returns it did in the past compared to other asset classes. Effectively this could contribute to a situation where retirement savings will not accumulate to a sufficient level to fund an individual’s entire retirement years.

We all know a lot of retirees have suffered from the sequencing risk or timing of the global financial crisis and will struggle to make this ground back up.

It is then imperative they explore the most effective strategies to maximise their retirement capital base and the only way to do this is to be skilled up and have a good broad knowledge of investment classes that will work to their best advantage.

Once again a better educated population of SMSF trustees will be the key to achieving sound self-funded retirement.

In an effort to help this process self managed super magazine is hosting a series of SMSF trustee education seminars in May. To find out more and register, visit http://www.cvent.com/d/pcqv30.  If you would like a free year’s subscription to the magazine and its associated e-newsletter, valued at $100 send your details to info@bmarkmedia.com.au.