Strategy review should dig deeper

SMSF investment strategy review

SMSF investment strategy reviews should look into issues beyond returns within a fund to ensure they are fully compliant with trustee obligations.

SMSF trustees who have complied with the ATO’s requirements to have a properly set out investment strategy should also be looking to ensure their review obligations are more than just double-checking the strategy each year.

Smarter SMSF chief executive Aaron Dunn said while investment strategies have attracted much attention, the obligation to review that strategy remained just as important and trustees were obligated to act under Superannuation Industry (Supervision) (SIS) Regulation 4.09.

“In the last four months, 28 per cent of all orders that went through our platform form part of an investment strategy. We know this has been a critical area of follow-up from the ATO, but also from auditors as well,” Dunn said during a recent webinar.

“The challenge, however, is going to be that we’ve spent a lot of time on getting a much better investment strategy document in place, but the SIS regulations make it absolutely clear that we must regularly review that investment strategy.”

He said currently review documents are very similar to previous investment strategy documents, which just replicated the rule that a review was needed but no further action was taken, but in this case action was needed to meet the key areas of SIS regulation 4.09.

Smarter SMSF would be adding these considerations into its own investment strategy review documentation, which would note the formation of an initial investment strategy at a particular time and that it was being reviewed because of compliance requirements or another event that might be occurring, he said.

“The idea behind this is the trustee is giving effect to their strategy and is still considering the whole-of-fund circumstances that was set out in the initial investment report,” he said.

“We are looking at a simple form where the client can tick through the relevant questions and will cover single asset classes and heavy asset concentration, and also consider liquidity, the ability to pay benefits, if there is a minimum pension being withdrawn or other impacts on the inflows and outflows around the payment benefits, and any insurance considerations and whether there is any advice that continues with those matters.

“To me, this is really part of what auditors are going to be looking for and the expectations upon trustees around what regularly reviewing their strategy will actually look like, and this process gives more information around what a proper review looks like in accordance with SIS regulation 4.09.”

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