There is a growing trend towards investors managing their own superannuation ($68.7bn in 2000 compared to $594.8bn in 2015[1]). With so many funds being managed outside of the large retail and industry superannuation funds, careful consideration should be given to the products and structures that hold these savings.
This swift rise in the popularity of SMSFs has brought promotion in the media, and has led to an increasing number of people contemplating if their industry or retail superannuation fund is providing them with the returns and flexibility that today’s modern and savvy investor desires.
There is another option that provides a similar level of flexibility and control to a SMSF, but without taking on the responsibilities of a trustee.
A “wrap” is a platform that acts like a gateway to thousands of wholesale managed funds, direct shares, hybrid securities, fixed interest investments and other asset classes. The wrap provides the investor with a consolidated report on their financial position, and removes the administrative and compliance burdens that come from trading and holding multiple assets within a portfolio.
Even the Australian Securities and Investments Commission (ASIC) has commented that it does not want to see “an influx of (SMSF) trustees who are ill-equipped to cope with the responsibilities and obligations inherent in running an SMSF”.
Generally speaking, the products will suit the following investors who:
SMSFs
– Prefer to be ‘hands on’ and dive into the details
– Have over $200,000 to invest due to the costs associated with setting up and annual reporting to the regulator
– Want access to owning residential property and / or alternative investment such as collectibles (artwork, antiques etc) in their superannuation
Wraps
– Have a small starting balance (although the sky is the limit!)
– Don’t have the time to fulfil the obligations of a trustee
– Are not concerned with the minute details and are happy to work in conjunction with an advisor
Overall, either option can provide an investor with advantages and disadvantages as each client’s circumstances will be different. As with all financial strategies, it is always recommended to speak with a professional about your own personal circumstances to assess the suitability to your own situation.
We regularly provide advice to clients who either hold their superannuation through a wrap account or a SMSF, and we pride ourselves on being experts in both investment styles.
For an obligation free conversation about your financial future, please contact us on 03 9603 0072 or at advice@endorphinwealth.com.au
Phillip Richards
Director and Wealth Advisor
[1] APRA Statistics Quarterly Superannuation Performance March 2015
[2] ASIC Report 337, SMSFs: Improving the quality of advice given to investors, page 5
