Rolf Howard writes an article for the website SMSF Adviser where he talks about the duty of practitioners when it comes to finding out whether the SMSF is the right vehicle for their clients. SMSF is definitely a lucrative proposition but its success is not only determined by your level of independence and your business acumen. A lot also depends upon the kind of professional advice you get. Let us probe further.
All the possible legal and regulatory traps
Before else, the practitioners must look hard at every dimension of the legal and regulatory traps while advising their clients. You don’t want a case where your client makes a lot of money but breaches the in-house asset rule or the arm’s length rule and is penalized stiffly.
Is SMSF the right vehicle for you?
Is SMSF for you? Can well and truly be but you have got to figure out first whether you have enough funds in your SMSF to make the set-up and administrative costs worthwhile. Also, if you have got a few million too many, SMSF might not be the right vehicle for you as other funds may help you maximise your profits better.
Do you have enough time in your hands?
You also need time in your hands so that you personally supervise your investments and research into the viability of your investment strategy. This can be true for even those SMSF members who have got a brilliant think-tank working for them.
Have you got adequate protection?
There are certain provisions in the Super which do not pass on to the SMSF. So, you have to predetermine if you have adequate insurance protection, income stream protection and total and permanent disability cover.
What is the level of your financial knowledge?
Sometimes, SMSF investors can get carried away and follow a popular scheme without reasoning out its benefits for their particular fund. Such schemes may fall completely in line with their investment strategies and also look good on the paper. Yet, they may falter. So, it is crucial for SMSF trustees to be well versed with financial knowledge themselves so that they can judge the risk-benefit equations and fulfil their fiduciary responsibility well.
You can read the original article here.
Knowledge is the key to succeeding in any field of business. It is only that the attribute of knowledge changes. Even athletes require thorough knowledge of the good, bad, and ugly things about their muscles and ligaments. The idea rings just as true for the SMSF sector. You have got to know the grind even if you have the services of great financial advisers at your disposal.
I recently read an article which stated that if a fund is lean enough to be set up as an SMSF, it can also be too fat for SMSF. True! Your kitty can only help you determine which might be the best course of action for you.