Thousands of articles across the internet are devoted towards answering the question, “Is SMSF for you?” I won’t shy away from agreeing that I have myself spent a bit of energy talking about the subject over this website. So, let me just try reaching out to you on this matter with a different perspective.
Do you have money, expertise, and time to tackle your fund?
No one can conclusively call whether SMSF is right for you or not, but at least the services of a professional adviser will remove a great deal of ambiguity. You have to answer yourself first and the question is not a small one to tackle. Do you have the money, expertise, and time to tackle your own fund; remember it is ‘self-managed’?
High operating cost
There are costs associated with running an SMSF and it can touch about $1,500 a year. If you lack expertise to parley over your investment strategies, you would have to appoint an adviser for the task and his pay check would add to your running cost. You can only have this kind of dough to spare if such costs are 1% or less of what you are going to play with. 1% is a fair industry standard for operating costs. This implies that you are only good for the game if you have something like $200,000 in your SMSF kitty. So, do you have that kind of money?
Question of organised crime
Now, feel free to look at a different, but equally important angle before setting up SMSF for yourself. SMSF is a market where organised crime has just begun to thrive. It has spread its tentacles because there is a lot of money to be lapped up. One mistake and your end and your entire banking information can go to these crooks.
You just need to think about what happened to Trio Capital to gauge the kind of harm a sophisticated criminal network can do. So my next question is: if you manage the trust by yourself, do you have the know-how to dupe these criminals, time and again? Because even if you win 99 times and they win once, you know who the loser will be.
Norms, protocols, guidelines, and regulations
Another point worth considering is the time you need to give to understand all the regulations and compliance norms. Yes, there are webinars and social media correspondences to assist you, but understanding penalties, new ATO guidelines for SMSFs, compliance norms, ASIC guidelines and SPAA declarations are not an easy lot to process unless you are devoted to the job. So have you got the time for it?
Investment decisions may not be too easy to make
And if all goes right, are you really good with the investment decisions? Of late, financial advisors — for the sake of commissions — are parading non-accredited real estate agents to SMSF clients hoping that the very same clients would borrow against their SMSF to invest in real estate. Such properties are unfailingly overpriced. I am giving just one example where lack of knowledge can hurt.
I am a big admirer of SMSF and completely buy its intrinsic idea. I also think, if exercised well, it can solve the retirement dilemma for many of us. This, however, does not refrain me from asking myself: is SMSF the solution for all my potential clients?
How do you foresee SMSF investors coping up with sophisticated criminal network?