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.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.