Self-directed SMSF trustees investing in a handful of equities and cash should not be using the vehicle to build retirement savings, according to an investment fintech head, who said this type of investment approach was not a result of a well-developed strategy.
OpenInvest chief executive Andrew Varlamos made the comments today as part of the Chartered Accountants Australia and New Zealand National SMSF Conference Online 2020, where he criticised SMSF trustees and advice practitioners for the lack of diversity in fund portfolios.
“If you do not have a portfolio that is going to give you the best shot at safe, dignified retirement because you think you know how to pick stocks based on reading the Financial Review, I think it’s a form of madness,” Varlamos said.
“There is nothing wrong with having an SMSF and having property in the portfolio, but the rest of it should not be sitting in cash or bank shares.”
He pointed to the most recently released ATO statistics, which showed cash was the second biggest asset held by SMSFs, at 26 per cent of total SMSF assets, and funds with lower balances tended to hold higher levels of cash.
“This is not a function of well-thought-out strategising on the part of SMSF trustees and is either because they don’t know what to do with contributions into their fund or they are too busy,” he said.
“Younger SMSF trustees building a business are most busy and less likely to be properly investing their money and rather than lowering risk for them, it is actually the highest risk thing they can do,” he said, adding their investments were not being maximised which reduced the chance of meeting an adequate retirement goal.
He pointed out SMSF trustees were able to access managed diversified portfolios via robo-advisers, financial advisers, online investment managers and self-directed investment marketplaces, such as OpenInvest, and had no reason for poor asset allocation in their portfolio.
“It is not as if finding a diversified managed portfolio is hard. It has been hard and it has been expensive and taken a while before innovations happen and simple things occur like clicking a few buttons and having a diversified managed portfolio run by a global expert,” he said.
“Now those things are available, there is no excuse for holding three shares and term deposits and hoping for the best.”