Mini SMFS?

Hi All,

Just throwing it out there but any pro's and con's re mini SMSF's?


Cheers Spades.

So a mini SMSF has $ issue with that. I don't believe in minimum balance, its really the strategy of the fund that will dictate the minimum balance required.

We have many clients purchasing property with $80k. We have many SMSF members starting with less than $50k - who are usually educated with a trading strategy. We charge a fixed fee - which won't change. Many australians already have a mini SMSF.

The issue with the option in the attached is that you are charged a % fee, something I don't like. As when you fund grows, your admin fee will increase. Same deal, need to understand if the % covers everything and are they advising you on investments and life insurance, something they will take a commission on.

These days the fees of the 'traditional' accountant don't work, the SMSF market is competitive and you can have Annual Admin and compliance done for $1000 or less. So if you have $50k in SMSF and pay $1k admin that 2% year one, and lets say year 2 you have $100k in SMSF with a fixed fee the admin fee is 1% and so on. With a % of assets charge you don't get this.

I agree with the 'things to consider', however, I note Justin is a Head of Inv at Sequoi Asset Management, so is there a catch?

Just my 2cents...

Cheers, Ivan
The less $ in any super account the more restrictive the investment options will be. You cant invest in a marketable parcel and brokerage will be high v's benefits. For example - You CANT get high rate term deposits under $50K and the admin involved in changing banks to do so might be onerous. So strategies become focussed on higher risk to get $$. "All In" with one investment becomes the strategy. Boom v's bust ?? Leverage and high risk investmnets are a way to get the boom (or maybe the bust).

SMSF costs are fairly fixed. I always explain SMSF costs as "largely capped" - The cost to establish and maintain are almost identical whether there is $100K or $1m. I'm an accountant and I argue I could do my SMSF annual compliance for $700 as a minimum. (ASIC annual Fee, ATO levy, audit) I wouldnt do it. How can anyone else - they have to sell other things that make $$$$. What would I invest in ??? Small parecl of this and that ? No strategy = no great benefit unless I assume more risk. And I lose life cover.

I wouldn want to be the adviser setting up $50K SMSFs. Makes NO sense whatsoever. There are many other ways to control and manage $50K of super (ING Direct for example gives direct shares, high rate deposits etc). Even an industry fund. They arent exactly "losing" money. They offer low cost super for small balances. Problem is as balances rise so do fees. There is no strategy I can think of that supports such a small balance other than a "early release" to help the individual put a deposit on a property owned jointly etc. Or leverage that ensures the advisers make $$$.

ASIC would ask where the statement of advice is...No way it could address costs and returns. Or loss of prudential protection. Or the loss of life cover at group policy rates that most funds offer. Its replacement in a SMSF would cost 50% more IF it can be obtained.

I wouldnt expect this "club" to be peddling this line for long. Fancy calling a adviser a "SMSF coach"...Will they be licensed adviser ? Given few staff hold any qualification I'm not so sure. ASICs approach on misleading and deceptive conduct in the field of cheap SMSF admin is getting tighter. Disclosure responsibilities under AFSL remain the problem.

Income from referral for other services is the model. Property sale, LRBF loans, insurance, advice etc..... This model is how to create a $10K cashflow stream from low balance super accounts that take on exceptional risk.

I refuse to sell property for this reason. I cant advise on strategy and sell property and make $$ on it or the loan without conflcited advice. For anyone thinking of establishing a SMSF ask the adviser if they sell property and earn fees, commissions or any other form of income from it.

SMSF costs arent about admin - Its about comparison of all features and things gained and lost. A leverage fund could be all lost. Personalised advice and not a one stop approach is required. Hard to see advice is not conflcited from a smsf establishmnet service that does admin and sells property. Really a strecth to then say "cheap admin" justifies it.
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