Investment strategies need work

SMSF investment strategies

SMSF investment strategies on the whole are currently sub-standard in terms of their quality and suitability for purpose.

A specialist auditor has called for a greater focus on SMSF investment strategies to ensure the standard of these documents improves so they are able to serve the purpose for which they are designed.

Saul SMSF managing director David Saul made the appeal to financial advisers in the sector having reviewed a significant number of investment strategies during fund audits.

“Quite often I’m disappointed by the quality of the investment strategy. [Often] it’s just a very generic document and [trustees] think they can just slap it in there and that’s good enough,” Saul said at the most recent SMSF Association Sydney Chapter event.

“It’s got to be valid and considered. It’s got to consider the risks, the recoverability or liquidity [and] the performance of the investments. It’s got to consider personal insurance for each of the members.”

According to Saul, the situation will improve if trustees treat their approach to the investment strategy and the role it plays within the fund completely differently.

“There should be a greater focus on beefing up the investment strategy and [trustees] should use it as a live working document,” he said.

Funds holding non-traditional asset classes in their portfolios need to pay particular attention to this critical document, he suggested.

“[These SMSFs] need to put an in-depth statement around [these types of assets], so why [the trustees] have considered it and why it is a superior investment over everything else in the fund,” he said.

He added practitioners also need to change the way they take the investment strategy into account when performing their roles.

“I understand financial planners and accountants have got their job to do, but it should bolt into the side of a good investment strategy,” he noted.

“There are so many [investment strategies] that are just generated generically and I think that’s something that could be improved.”

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