Iconic and Clearwater offer assistance to ‘at risk’ SMSFs
A new service has been launched to assist SMSFs that do not meet the ATO’s investment strategy guidelines, requiring trustees to tailor the strategy to the fund and its members.
SMSF specialist financial services firm Iconic has added a new SMSF investment strategy service which reviews current investment strategies and prepares a document that complies with ATO guidelines.
It was developed in collaboration with boutique investment firm Clearwater Capital and prepares an investment strategy document that is specific to the retirement goals and investment objectives of the members of the SMSF.
Iconic director Tony Zulli believes a significant number of SMSFs do not meet the guidelines and auditors may have to consider contravening funds.
“We expect to see an increase in the number of funds who will be asked by their auditors to ensure the investment strategy meets the ATO guidelines,” he said.
The ATO has already written to more than 18,000 SMSFs who had a single asset in their fund in an attempt to build understanding of the guidelines.
“The ATO has made it clear that SMSFs can no longer simply use a standard template with limitless asset allocations as their investment strategy,” said Iconic director Neil Schafer.
“Many of the investment strategy documents we have reviewed are simply templates off the shelf that are not tailored to the funds.
“We believe the service is extremely valuable for funds where little consideration has been given to investment strategy or where there is little diversification in the SMSF,”
Iconic has been working with SMSF service providers in rolling out the service.
“Our approach is to work with accountants, administrators, auditors and SMSF advisers so they can be confident of their fund’s compliance,” Mr Zulli said.
Iconic and Clearwater developed a set of objective diagnostics to measure the attributes of the investment portfolio including diversification, liquidity, cash flow, volatility and risk/return.
These measures are then used as inputs into the investment strategy document. Noting that the investment strategy must be reviewed each year by trustees and set for the next 12-month period, capital market assumptions are also used for each asset class to provide trustees with some assistance in assessing what the future returns and volatility of the portfolio could be.
“It’s very valuable for trustees to understand the risk and return dynamics of their investments and how changes in asset allocation effects future expectations,” Clearwater Capital director Kris Vogelsong said.
“For most SMSF trustees this is the first time they have had any objective insights into the fund’s investments.
“We ask trustees and their service providers to supply us with the actual portfolio data as a starting point. We use this data to incorporate the key components of the new ATO guidelines including, asset concentration, liquidity, risk, cash flows, and insurance. We also help trustees to look ahead at any significant events over the next 12-month period, such as a fund member leaving, and adjust their strategy accordingly,” said Mr Zulli.
