Director: Jenny Brown

9 September 2013
Jenny Brown is Director of JBS Financial Strategists Pty Ltd In a Q&A with Canstar she explains how and why clients typically set up an SMSF.

Q:  In your experience, is there an ideal stage of life to set up a SMSF?

We believe there is no ideal life stage to set up a SMSF, rather it?s when a client feels that they want to take control over their superannuation and the underlying investments. We believe that there is a minimum balance required of $200,000 and would like to see this higher simply due to the running costs. Once a fund gets over $500,000 then the fixed fees to run a fund become a lesser percentage and that is really when the power of a SMSF shows through.

Q:  What do most of your clients see as the main benefits of having a SMSF?

Most clients see that control, diversification and the ability to purchase direct property and shares are the main benefits. The ease of establishing a Transition to Retirement income stream from age 55 has its benefits and the refund of franking credits helps create tax efficiency in the fund.

Too many clients are disenchanted with the fees charged by managed funds and the lack of transparency and we have found both these are driving forces for them to come and see us.

Q: How important is it for clients to get good-quality advice prior to setting up an SMSF?

Absolutely critical!  A poorly set up fund can create a lot of issues down the track and these can become costly to reverse or fix up.

Over the years we have had clients come in to see us with previously-organised SMSF funds, where they had not been able to obtain a TFN or ABN due to the fund not being set up correctly.  Trustees have an enormous responsibility to ensure that the fund is correctly administered and the members? monies are appropriately invested.  It is too easy to miss some parts of the compliance.

Good advice can easily add thousands of dollars of benefits over the years and certainly pays for itself both in the planning stage of setting up a fund and then ongoing with structuring and investment advice.

Q: For clients, what level of time commitment is typically involved each month in managing an SMSF?

If a client was to hold a direct property and basket of direct shares with some term deposits we envisage a couple of hours a month for the administration to keep it up to date.

To research the investments and buy/sell then this can easily creep up in time commitment to being a couple of days work.

Once a fund is in pension phase then there is more compliance paperwork with Trustees minutes and ensuring that the Trustee is aware of the rules for drawing money out, minimums and maximums of pensions etc. So really it can vary from, say, 2-6 hours per month to days, depending on the level of active involvement the client wants to have.

Q: What types of investments, in your experience, are clients typically interested in holding within their SMSF?  

Most clients want direct shares, hybrids, cash/term deposits and in some cases direct property.

There is a distinct move away from managed funds and complicated structured investments.

Easily understood and safe investments are common as too many clients have either had bad experiences in the past or have heard about others that got burnt.

Share this article