Protect your golden egg: Five steps to help set up an SMSF

If you are thinking about setting up a SMSF, then there are five things that you must do:

1. Seek professional advice

If you set up an SMSF, you’re in control – you make the investment decisions for the fund and you are responsible for complying with the law.

Your personal circumstances will determine the effectiveness of a SMSF strategy, so seek out quali?ed licensed professionals to help you. Licensed financial planners and accountants can help you understand what’s involved and advise you on your options.  Advice provided to you at a BBQ is not considered professional, so be very wary of free advice or free SMSF set ups as these can be traps and could ruin your retirement plans.

2. Know the laws and understand the risks

Think carefully about your investment options and how you can manage the associated risks.

You need to consider the short, medium and long term investment strategy of the fund and the level of risk each member is comfortable with.

All funds must maintain a degree of liquidity so be aware of this, spreading risk by diversifying a portfolio will require previous investment knowledge or expert advice.

With control also comes responsibility and in a SMSF that lands squarely on the shoulders of the trustees. If you decide to set up an SMSF, you’re legally responsible for all the decisions made, even if you get professional advice.

Remember that superannuation has one purpose, saving for your retirement; this means using your super funds for anything else prior to retirement could be deemed illegal and fraudulent.

3. Ask yourself, ‘do I have what it takes?’

The main responsibility of a trustee is making sure that your funds are invested appropriately, so ask yourself:

  • Do I have the time and knowledge required to maintain and operate a fund?

  • Do I have the confidence and ability to make sound investment decisions?

  • Can I meet the obligations that are required to be a trustee?

  • Can I outperform the professional funds managers?

If you’re not sure you can get the best result, you will need to employ the services of professionals. Choose these professionals wisely.

4. Make sure it’s right for you

Just because you can set up a SMSF doesn’t mean you should. Establishing and maintaining a fund is not for everyone, so if you are not happy with your existing funds poor returns seek professional advice and make sure that a SMSF is right for you.

5. Build your A-team of professionals

After you have thoroughly considered your options, and you decide that a SMSF is the way to go, get to work on building your A-team.  Most successful SMSF investors will have a team that they have put in place to the get the best results; this will generally be made up of a financial planner, accountant, auditor, mortgage broker, and solicitor. Also more recently qualified property investment advisers, buyer’s agents and property managers have been playing very important roles in the process for investors.

Julian Fadini is director of Bellevue Capital Financial Services.

This article first apppeared on Property Observer.


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