Robo-adviser hits out at minimum balance arguments

An automated advice provider has disputed the idea that SMSFs with balances below $200,000 cannot achieve diversification and good returns, despite some of the data suggesting otherwise.

Six Park chief executive Patrick Garrett says while some people in the industry highlight the fact that the ATO’s SMSF statistics show a correlation between low balances and lower performance, it is possible to create a well-balanced portfolio that achieves good returns with less than $200,000.

Mr Garrett said it’s not the low balance that results in low returns, but poor diversification, which stems from a number of factors.

“You can get diversified very easily using ETFs, and if you rebalance and do these other things and your costs are low, performance is going to be pretty good,” he said.

Some SMSFs that have not properly considered their asset allocation are taking on too much risk or missing out on returns, Mr Garrett said.

A white paper report by Six Pack revealed that many SMSF investors are paying excessive fees for investment advice, that are not only higher than they need to be but are also impacting their returns.

“Given these factors, it’s not surprising that we hear and read that many SMSFs, particularly those with smaller balances tend to have poor investment performance. But it doesn’t have to be the case,” Mr Garrett said.

“Changes in technology mean there is now no reason why SMSFs, even those with small account balances, cannot build portfolios which are globally diversified and tailored to their risk profile, objectives or time horizon.”

Mr Garrett said there is also no reason why portfolios for SMSFs should be expensive to implement or maintain.

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