Self managed super funds, dangers and opportunities.
We all like to have control over what we do which is why Self Managed Super Funds are quite attractive for many of us. We prefer to decide what we invest or how we invest our Super Fund than having some other person or organization do so for a price or commission. We might even feel we can do better than the average super fund and that nobody will put the time and interest in our fund that we will.
All these arguments and points are valid and worth thinking and acting upon. However if you are thinking about managing your own super fund there are two points you need to think about.
1) Managing your own fund is a privilege and a responsibility. If you manage your own super fund it will be your responsibility (and yours alone) to fulfill the legal requirements associated with your fund. Not complying with your legal super fund requirements can mean red tape, time and ultimately fines. You must therefore have the legal knowledge or advice to meet your legal super fund requirements.
2) Managing your own super fund means exactly that, deciding what to invest your money in. This might sound good and it can be, but it also means that you are responsible for the investments you make and without the financial knowhow you could make bad choices and lose your hard earned Super contributions.
If you still think managing your own fund is a good idea your next step is the find the knowledge and / or advice you need. You can find this knowledge from many sources, it is always a good idea to get your advice from established and experienced operators that can help you make the right moves to invest your super fund and make it grow. It is therefore a good if not vital move to contact a legal and a financial expert before you make any drastic moves with your super fund.
Without this advice you run the risk of either not meeting your requirements for a super fund, lose money (unfortunately that is always a risk, however this risk is lower if you invest wisely for the long term) or fall out of the definition of a self managed super fund.
It is therefore a good reminder to go through the main requirements of a legal and licensed super fund. The exact rules that govern your self managed super fund will depend on the kind of self managed super fund you have (more posts on that issue soon)but these general guidelines apply to all self managed super funds:
1) You must be honest in everything you do related to your fund. The taxation office will fall on you like a ton of bricks if you don’t.
2) You must be diligent and know what you are doing with matters related to your fund.
3) You need to act in the best interest of the super fund members. That is easy when you are the only member but requires more attention when your fund has other members.
4) Keep your personal assets and the super fund separate.
5) Have control over your super fund at all times
6) Have a clear fund investment strategy
7) You can’t embark in contracts or agreements that involves depriving members of rightful control of their assets.
8) Provide your members with required information.
9) You can’t access or allow others to access funds early.
Understanding and putting into practice these guidelines will allow you to overcome many of the dangers of managing your own super fund.