Self-managed superannuation fund (SMSF) trustees are most likely to consider closing their fund within the first year of establishing it, according to research conducted by RFi.
Discussing the results of a recent RFi survey of 1,000 SMSF trustees, the company’s director Alan Shields said one of the key motivators for setting up an SMSF is to save money in fees.
The expenses associated with running a self-managed fund often come as a bit of a shock to trustees, he added.
“In the first year [trustees] have a bit of an ‘oh no’ moment when they go through their first end-of-year tax fees and audit fees,” he said.
Thirty-five per cent of respondents who established their fund between seven and 12 months ago said they were ‘somewhat likely’ to close their SMSF, according to the RFi survey.
But the number of trustees who are willing to close their fund goes down as the tenure of the SMSF increases, according to the survey.
“[The trustees’] likelihood to want to go back to retail or industry super is higher in the first year. Their satisfaction is lower, and their happiness with setting up the fund is lower — all of those measures improve after that first year’s out of the way,” Shields said.
But only 12 per cent of trustees who have operated their SMSF for five years of longer said they were likely to close their fund, according to the survey.
RFi also asked trustees if they regularly sought advice in relation to their investment strategy.
Only 24 per cent of trustees with less than $200,000 in assets in their SMSF said they regularly seek advice, according to the RFi survey.
“The people who have less than $200,000 are much more likely to have decided to set up the fund themselves with no recommendation from anybody else,” he said.
SMSF trustees with lower balances are less likely to be getting ongoing advice, and are more likely to putting all of their money in cash, which is “quite worrying”, said Shields.
But those with higher balances are likely to be getting some kind of regular advice from an adviser, Shields said.
Forty-two per cent of trustees with between $200,000 and $500,000 in assets said they were seeking regular advice, and 46 per cent of those with over $500,000 are looking for outside guidance, according to the survey.
When it came to reasons for setting up an SMSF, respondents listed ‘to have hands-on control over my superannuation’ first, followed by ‘to give me flexibility’, with ‘to reduce the level of fees’ coming in third.
By: Tim Stewart