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Reviewing your SMSF Strategy

The federal election has now come and gone and we await the passing of the legislation announced in the May 2016 budget. If this legislation is passed, our clients will be in a better position to plan moving forward.

However, July each year offers us a reminder to attend to a number of housekeeping issues related to our Self managed Super Fund namely:

  1. Review your investment strategy

Trustees should review your SMSF’s investment strategy whenever the circumstances of your members change and periodically to make sure it is up-to-date and meeting your objectives. A well structured Investment Strategy goes along way to ensuring your funds performance meets the members’ expectations.

Part of the strategy review should be a discussion regarding the insurance needs of the fund members (life, TPD, etc). The SIS (Superannuation Industry Supervision) Act requires that trustees regularly review whether their fund holds insurance cover for the members. We have dedicated staff in our office that can guide you through this process, ring for a no obligation discussion.

  1. Review your asset allocation

The recent fluctuations of markets brought on by the BREXIT vote emphasises the need to review your asset allocation on a regular basis.  The asset allocation should assist the fund in meeting the investment objectives of the members. Very rarely are these objectives static. If any of the below occurs then your asset allocation will probably need to change:

  • Circumstances of one of the members changes;
  • Investment objectives change;
  • Your assessment of the risk of specific assets changes.

During this review process your views on markets change and asset classes perform relative to each other, you may wish to review your allocation. As the weighting is based on the market value of each asset class, the chances are that your allocation at the end of the year will be somewhat different to how you started the year.

  1. For stocks and shares, have a ‘Big Picture’ view and check your sector allocation?

It is often said that the S&P/ASX 200 index is an expression of the future expected performance of a range of industry sectors.

The S&P/ASX 200 is divided into 11 industry sectors. The weighting of these sectors (by value) reflects investors’ expectation of which industry sectors are likely to perform better when compared to others.

There are many factors at play which impact on these weightings. As such, they are constantly changing over the course of the year as investors reassess the expected performance of each sector and their attitude to risk.

The sector rating and allocation you adopt should complement the investment strategy of the fund.

It is important that you have a big picture view when considering Sector allocation. We have staff at Poole Group who can help you in this regard.

  1. Admit your mistakes, own them and move forward wiser.

Inevitably, investors may make a mistake or two over the course of the year. Acknowledging this and knowing when to move on to an alternative investment is often a difficult thing to do. Often we are emotionally attached to the initial investment decision, so having a second opinion from someone (with no emotional attachment) can be helpful.

In the new financial year, take the time to reflect on your poor investment decisions (if any) and learn from them.

  1. Estate Planning Issues.

Like birthdays, the rollover to a new tax year reminds us all of how quickly time gets away.

For most SMSF clients their superannuation fund will represent a significant asset to the family group on death. This asset can be treated very differently from an Estate planning point on the death of a member. Our experience has been that many clients are not aware of this. In fact we believe that part of the motivation for the recent changes announced in the May 2016 Budget 2016 stem from this fact. There are significant tax costs associated with not understanding this point.

So use the beginning of the financial year to understand how these issues may impact you and your decease estate nest egg. Read how the proposal budget chances will affect your Estate Planning.