Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Five reasons people are starting SMSFs in droves
SMSFs have been at the centre of the superannuation arms race for several decades. As a financial adviser, I am regularly stuck in the middle of administration and combative nightmares.
On the one hand, we meet many investors, both advised and un-advised, who have SMSFs in place, but clearly don’t have the time, interest or knowledge to be managing their own capital. On the other, we constantly face headwinds from many industry super funds when attempting to transfer super balances into SMSFs where they are deemed appropriate.
Despite these short-term issues, SMSFs have been surging in popularity once again, as highlighted in my article on the Class Super report. There are many reasons behind this resurgence in popularity, but ultimately, I see five issues as being central to the sector.
The nature of providing investment and financial advice is that the majority of obligations to act in the best interests are based around the cost of products or services provided, with other benefits considered secondary.
Despite marketing, and even a regulator fact sheet, to the contrary, SMSFs can actually be cost competitive, and cost effective at balances of just $200,000. This has been achieved like in every other sector of the economy, through the proliferation of technology, data providers and outsourcing services.
Among the most common reasons for those who ask me about SMSFs, is the ability to control their own destiny when it comes to their investments. Superannuation has for too long been seen as ‘other people’s money’, managing by a massive super fund or bank and forgotten about. Australia is unique in allowing everyone to control their superannuation balance, deciding on everything from which bank to utilise, to which assets to own.
This shifts into the third reason, which is alignment. The world of finance is an incredible series of contradictions, particularly when it comes to climate, or environmental, social and governance issues. As much as the major super funds put a significant amount of work into building sustainable options for their members, they rarely live up to the label and everyone is different. SMSFs allow their members to ensure their investments are aligned with their personal preferences and views. This means you don’t need to own an oil pipeline if you are against the use of fossil fuels.
Flexibility is incredibly important to all SMSF trustees. Whether this comes in the form of the flexibility to choose which investments and accounts to use or more broadly, the implementation of beneficial but sometimes complex superannuation strategies. The rules within major super funds are strict, with cut off dates, templated forms and very little flexibility. On the other hand, SMSFs offer significantly greater flexibility when it comes to timing contributions, investing in different asset classes and even avoiding errors like excess contributions when they occur.
The final reason is family. Recent changes to legislation now open the door for most families to have their own SMSF including their children. This has a twofold impact. Firstly, you are able to engage and involved your other family members in investments, and secondly, you are able to more closely control the payment of your superannuation assets on your death, with superannuation being a non-estate asset.
