I began my Aussie employment career with a small accounting and financial planning firm and quickly learned the usefulness of an SMSF, especially for small business people.
From hands-on experience and education at the time, it was clear to me that you needed a decent balance and regular contributions to make a SMSF work for you from an expense viewpoint. When it came to my own money I thought that as a budding financial planner I should walk the walk so I set about reaching a goal of $200,000 in superannuation between my wife and I.
I only came to Australia in 2001 with a very small UK pension fund, having worked in the Middle East for eight years with no pension contributions. So I knew I was playing catch-up from the very start.
My first priority was to invest aggressively while I was still young(ish) and at that stage you could not leverage assets directly inside an SMSF. So I opted for a retail superannuation fund and over the next decade I used a portfolio that included a geared share fund most of the time, managing not to get too burnt during the GFC and riding the wave in the rebound.
I reviewed my fund every six months and stuck to my aggressive strategy, but as is often the case, you get too busy taking care of clients to manage your own affairs. By the end of 2011, I realised we had more than achieved our objective so now was the time to review our options.
So again I decided to walk the walk and when an opportunity came up for us to invest in a property development, something which we could not do in our retail fund, I spoke to my wife and we agreed that an SMSF would be our best option going forward.
By waiting until I had a decent balance I was able to have a well-diversified portfolio, and thanks to product enhancements, I have a geared ETF to replace my previous managed funds, direct Australian equities and some international ETFs and managed funds as well as my property exposure.
Another benefit of waiting was that I had set up my insurances from the very start in my retail super fund and I know if I had gone with an SMSF from the start I would have hesitated to pay for insurances from a small balance on top of the admin fees. Cancelling cover when moving to an SMSF is a mistake that I see many SMSF trustees make and warn all against. Those who know me can attest to the fact that I am rather large, and being clinically obese I struggle to get insurance cover. By setting up the insurances earlier, I can now keep a small but decent balance in my retail fund and retain those insurances that cannot be replaced.
I still have 25 years to age pension age and 15 to my target transition to retirement, so now as my fund grows I can seek opportunities and use the flexibility of my SMSF to invest my way in what I want with no one else to blame if I get it wrong.
One surprise move that I have made is to take on one of my colleagues as our family adviser to ensure I don’t let SMSF and other planning issues slide as I focus on my business. The regular reviews with “my adviser” are something I stress to my clients, so again I will walk the walk and this keeps me on track.
Liam Shorte is a director at Verante Financial Planning.