A specialist financial services firm offering assistance to advisers has partnered with a portfolio management company to help SMSFs that have not meet the ATO’s investment strategy requirements by providing compliant fund-specific documentation.
The Investment Strategist service is a collaboration between Iconic Investors and Clearwater Capital and will produce investment strategy documents, including those covering insurance, in line with the specific retirement goals and investment objectives of SMSF members that comply with the ATO guidelines.
Iconic Investors director Tony Zulli revealed as part of the development of the service, the two firms created a set of diagnostics that measure the diversification, liquidity, cash flow, volatility and risk/return within a portfolio, which are then used as inputs into the investment strategy document.
“We ask trustees and their service providers to supply us with the actual portfolio data as a starting point. We use this data to incorporate the key components of the new ATO guidelines, including asset concentration, liquidity, risk, cash flows and insurance,” Zulli said.
“We also help trustees to look ahead at any significant events over the next 12-month period (for example, a fund member leaving) and adjust their strategy accordingly.”
Clearwater Capital director Kris Vogelsong said the service also covers the annual review of a strategy and capital market assumptions are used for each asset class to assist trustees in evaluating the future returns and volatility of the portfolio.
“It’s very valuable for trustees to understand the risk and return dynamics of their investments and how changes in asset allocation affect future expectations. For most SMSF trustees this is the first time they have had any objective insights into the fund’s investments,” Vogelsong said.
According to Zulli the service was developed because a significant number of SMSFs do not meet the ATO guidelines and auditors may have to consider contravening funds.
“We expect to see an increase in the number of funds who will be asked by their auditors to ensure the investment strategy meets the ATO guidelines,” he said.
Iconic Investors director Neil Schafer added there were still many funds with non-compliant strategies despite the ATO making clear its position after it contacted 17,800 funds regarding their strategies.
“The ATO has made it clear that SMSFs can no longer simply use a standard template with limitless asset allocations as their investment strategy,” Schafer noted.
“Many of the investment strategy documents we have reviewed are simply templates off the shelf that are not tailored to the funds.
“We believe the service is extremely valuable for funds where little consideration has been given to investment strategy or where there is little diversification in the SMSF.”
