Crystal Wealth Newsroom
The benefits of a self-managed super fund
Usually, people – with the exception of government employees – have three options when it comes to super: a retail fund from a financial institution; an industry fund, or a self-managed super fund (SMSF).
When running an SMSF, you need a trustee – be it as a company or as an individual – who is responsible for the SMSF meeting all of its legal obligations.
“Because of that responsibility, self-managed super funds are not for everyone,” says Crystal Wealth executive director John McIlroy. “Trustees can – and often do – appoint a company such as ourselves to manage the fund and its investments, but ultimately it is the trustee’s responsibility to ensure the fund meets all of its obligations.”
If you are comfortable shouldering that responsibility, however, you do enjoy some benefits you usually wouldn’t should your money be invested in a retail or industry fund.
The majority of Australian SMSFs (70%) have two members according to recent stats from the ATO, the reason being that joining financial forces can result in a greater pool of funds to draw on when it comes time to determine your investments.
“Couples choosing to pool their money and invest in one strategy, rather than having separate super accounts sitting behind a number of different funds, stand to benefit from a greater amount of control and flexibility when it comes to planning their retirement,” says John.
“You can actually have up to four members in the fund, whether that’s mum, dad and two kids, or two business partners and their spouses.
“Whatever you choose the most commonly described benefit of joining forces in this way is having more control over your future and the ability to make investments that you might not be able to through other funds,” he explains.
Operating a self-managed super fund also offers relatively easy access to global markets.
“The Australian share market makes up about two per cent of the global share market, but most people in Australia tend to invest disproportionate amounts of money into the local share market,” says John.
“And, of course, there are some good reasons for that. But if, for example, I wanted to own a portfolio of technology stocks listed in the UK or US, I can do that efficiently through a self-managed fund.
One of the main attractions for people considering an SMSF is the ability it gives you to invest in not only markets of your choosing, but companies, too.
“With a retail fund, I might have reasonable options as to where I want my money invested,” says John. “But it is limited. And with an industry fund that opportunity is generally more limited still.”
If you’re savvy when it comes to investment opportunities, SMSFs offer the ability to put your money where you see potential for the strongest growth.
“As an example, if I wanted to put some of my super into Microsoft shares, then the only real way I can do that is through a self-managed fund.
“Similarly, if I think of a particular sector, for example, to illustrate, cybersecurity, is going to grow more than anything else over the next five to 10 years, then I can invest directly into a fund that only holds cybersecurity stocks,” he says.
Another attraction of a self-managed super fund is the ability to purchase property in it.
“For instance, if you want to invest in property with your super, the only way you can do that is through an SMSF. You also have the option to gear that property, meaning the superfund can borrow to buy a property, which again, there’s no other way you can do that except through an SMSF,” says McIlroy.
Ultimately, as well as increased levels of control, there is a certain degree of transparency with an SMSF that you don’t get with other super funds.
“When people are asked about what motivates them to have a self-managed super fund, as well as that element of control, there’s a lot of value held in seeing exactly where their investments are, and what’s happening with them,” says John.
“With a retail or industry fund, most people would have little idea about where the money is invested. In a self-managed fund, I might have some domestic shares; I might have some fixed interest, some property; I might have some overseas shares, but I can see exactly where the money is – and that’s incredibly appealing.”
If you would like to explore the potential of taking more control over your super with an SMSF, talk with the team at Crystal Wealth, who will be able to guide you through the process to help you achieve your wealth creation goals.
The above information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances.