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The story of your life viewed through your SMSF

One of the most underestimated attractions of having your own SMSF is the power of a good story.

I love stories – whether it be reading a good book, sharing ideas with friends, or listening to a great story told by a successful entrepreneur, adventurer, close friend, or even a stranger. Stories are the best way to capture someone’s attention, make them think, influence their mood, and maybe even make decisions that change their life.

One of the things I love about SMSFs is how passionate people are when telling their SMSF story. How they got one, why they did it, what they’ve invested in, what they love about it, what they hate about it, and what they wish they did differently.

Even when I think about the most memorable presentations I’ve seen from SMSF experts, what audiences love most is the stories about real people - the good, the bad, and the ugly of running your own fund.

Understanding that SMSFs deliver the power of a good story better than any other super fund structure can really change your perspective, whether you are:

  • a trustee of your own SMSF, or thinking of establishing one
  • in the business of competing with SMSFs in the superannuation industry
  • an SMSF advisor looking to grow your SMSF business, or
  • an auditor of SMSFs.

SMSFs made it cool to be interested in super

The popularity of SMSFs has grown so widespread some are calling this the ‘golden age of the SMSF’. But how did that happen?

The answer is really simple – word of mouth!

Like many disruptive innovations, SMSFs delivered their members new stories worth sharing with friends at a BBQ. Just like many of the ‘cool’ start-ups today, their popularity didn’t grow through large companies with massive advertising budgets urging viewers to ‘compare the pair’. More often than not, the first time most people hear about SMSFs is from their friends. For Facebook users, it’s the equivalent of ‘like’ and ‘share’.

My life viewed through my SMSF

The journey of my SMSF has almost become like a biography of my life so far. Many of the major events in my life are mirrored in my SMSF in some way, and create stories in themselves.

I started my own SMSF when I was in my 20s. One of my first investments was to buy units in my employer’s property trust when they were expanding, which I later realised was just their way of trying to tie me in without offering me s partnership (it didn’t work!).

I learnt another valuable lesson when I got divorced. It turned out trying to save a few bucks by choosing individual trustees was a mistake, and I had to bite the bullet and buy a trustee company. It cost a fortune to change all my investments, but it was worth it so I never had to go through that again!

I’ll never forget the first time I decided that I would contribute right up to my maximum contribution cap. I was young, self-employed and had a mortgage, yet I did it anyway SOLELY because I felt better knowing I held the fund’s cheque book. Now it’s one of my annual financial goals.

When I sold my share portfolio before the GFC, I gloated about the losses I’d avoided. And I was super proud to buy my first office premises and lease it back to my business, which I never could have done without my SMSF. I also invested in a software company I was passionate about.

Then there’s the times I’ve helped my parents (members of my SMSF) use transition to retirement strategies to save tax and get cash when they need it, for a once-in-a-lifetime European holiday, or to fix their roof that blew away in a cyclone.

I tell how an industry fund stuffed my husband around for over six months when he joined our SMSF, giving every excuse not to pay his rollover. And I talk up how easy running my SMSF is now I have a great broker. I don’t have time to research and trade with four children and a busy career, so I found someone I trust.

My SMSF reflects the story of my life, and that’s not unusual. Marriage, divorce, business success and failure, ageing, death, good fortune, luck and loss – who said super is boring?!

Thinking differently to compete with SMSFs

If I were looking for a way to compete against the SMSF industry, I wouldn’t bother with the traditional arguments. Focusing on fee comparisons, administration burden, historical investment performance, or how much you need to start your own fund comes across as defensive and, to be honest, makes for a pretty ho-hum story.

What if, instead, the focus was on creating unique experiences for super fund members that made them excited to become a member, stay and tell their friends? I’m talking about the type of innovation in customer service that could actually turn super fund members into raving fans.

If the only experience members of a super fund have is receiving an envelope in the mail every six months with a super fund logo printed on the front, which they throw in the bin without opening, then it’s fair to say they won’t be sharing stories of your fund any time soon with their friends at a BBQ!

Using stories to grow an SMSF business

I’m not suggesting that an SMSF is for everyone, and there are most definitely many important factors that need to be considered. But if someone is looking to grow an SMSF business, it pays to think about giving clients the experience they crave.

Does your service, your technology, your support and ongoing engagement with your client provide them with the opportunity to ‘like and share’ their story with their friends?

Most importantly, are you focusing your expertise on ensuring their SMSF story is a good one, and that your clients can access the right support at the times in their life when they really need it?

Auditors need to be able to ‘see the story’ behind the numbers

The key to being a good auditor is to always understand the big picture. When I plan an SMSF audit I recognise that SMSFs are run by real people, with real lives, making real decisions. Rather than seeing my audit as a ‘tick and flick’ exercise, I read the financial reports like they’re telling me a story.

What story do the numbers tell me, and what do I know about the fund that will point me towards the risks most likely to need my attention this year? It makes my work much more interesting but also means I don’t waste anyone’s time trying a one-size-fits-all approach. I zero in on the real risks and eliminate what doesn’t apply.

 

Jo Heighway is a Partner, SMSF Assurance & Advisory, at Deloitte Touche Tohmatsu. Cuffelinks does not favour one superannuation type over another and welcomes other opinions on the merits of alternative fund structures.

 

9 Comments
Marcia
February 26, 2016

I found reading Jo's SMSF story interesting. She must find auditing our fund very boring.

Name withheld
February 26, 2016

Dear Ms Heighway,

Hopefully I get my small story to you. On my reaching the early 70's and dealing with the results of 'September 11', I was helping a charitable organisation that was having to wind down from six staff and over 300 volunteers annually from Australia and an number of other countries, going to volunteer in about 100 odd countries annually, the needed staff reduced to one with me. It was then that I sold my home and I then had the capital to create a Share Port Folio and with our Accountant's advice, my Port Folio became my Personal Super Fund that had to take a number of years to create, due to Government Rules of course.

Only one mistake was made due to my misunderstanding my rather aged accountant's explanation of what the Government's rules were, so that I over transferred for one year by $100,000 and even though I reacted immediately I discovered my mistake, I was fined $50,000 which I immediately paid and then the ATO would not refund the fine even though it was explained to be a genuine mistake. The poor older Accountant lost his father and due to ill health he retired and I did what I thought to be the best thing not to legally claim from his Accountancy Firm where he was, but only as one Partner, and even though the Government changed the rules related to genuine mistakes, the ATO refused to change my case. Ce la Vie.

So my Super Fund was and still is my Super Fund that now as I am near 80, the Government is 'pushing' me into reducing my Super Fund. This is where I am very busy 'today' in gaining Capital Value and Dividends from the Share holdings while still having to pay myself. It is "68 thousand" this year, which is not going to be too easy without reducing the Port Folio. But my time involved every day is great fun I agree.

So do not let your SMSF owners give it over to be all done by others (even if it is your job) as it is great fun and great Interest from a family point of view. I have had much pleasure doing all sorts of things that are still being done with my SMSF that I am determined to keep going as long as possible while still responsibly paying my ways as Canberra requires.

Chris Craggs
March 10, 2016

Dear Name Withheld

You don't need to draw down your Port Folio.

Just because legislation forces you to withdraw more from your SMSF than you generate in cash doesn't mean you have to drawn down your investments. An alternative, though perhaps not as tax effective as your SMSF, is to establish a Family Trust. You can then transfer your Shares to the SMSF, providing your SMSF with the cash to pay your pension (that then goes into the Family Trust to pay for the shares you just bought from your SMSF). You get to keep your shares and enjoy those lovely dividends you have become accustomed to receiving.

Legislation may dictate how much leaves the SMSF but it doesn't dictate how much you spend nor how much you invest.

Enjoy your retirement.

Marg Neilsen
February 26, 2016

SMSFs provide opportunities to grow financial knowledge and power, to seek advice and weigh up that advice against other sources of information. For me, our SMSF has been the story of growing awareness of good management strategies before money was inherited. As the value of our family SMSF has grown so has our family's interest in saving and investing. I struggled to feel encouraged to add co-payments and get excited about super when in an industry fund - and my employer was encouraging, insisting that each member met with their adviser at least once every 2 years. My adviser was helpful and has continued to be part of my 'support team' I would like to see the financial industry consistently encourage SMSF members to walk along side them when making decisions, rather than telling us we're not capable of making decisions. So much of what is written about SMSFs especially in newspapers and magazines is meant to undermine member confidence. That's why I read this newsletter weekly, as it encourages involvement.

Jo Heighway
March 05, 2016

Very inspiring Marg, I love that your SMSF grows with you, and that you have wisely found a support team to walk along side you in your journey. Thankyou very much for sharing.

mark bennett
February 25, 2016

Industry funds lose members as people with large balances choose SMSFs or retire. Industry funds should realise that these members could be 'retained' if they were offered help with retirement strategies and SMSF set up and administration. These areas may not be the typical domain of an industry fund, but perhaps they should be. Retaining a member under a different 'product' would surely be better than seeing them move to a competitor. The industry funds are in an incredibly strong position with members starting with small balances but staying in the funds for years, if not decades, as balances grow.Members are then lost when balances are substantial because the industry funds have not developed their product offerings in line with the needs of their clients.

Jo Heighway
March 05, 2016

Mark I'm not sure about you but I've noticed that many people who move into SMSFs often retain small balances in their industry funds - whether for insurance purposes, diversification, a bit of a safety net, or because they don't have fund choice over compulsory SG.

Industry funds could really take advantage of this by encouraging members to retain their connection over their lifetime by focusing on the arguments for having both an SMSF and retaining their industry fund membership. Could SMSFs and industry funds work together to provide complimentary experiences?

You're so right that industry funds have a great competitive advantage with attracting members early in their working lives. Viewing SMSFs solely as competition and not as an opportunity to work together is likely to continue damaging industry funds in the long term.

Alex
February 25, 2016

I have found from long experience that the more people talk about their investments the worse the performance actually is – usually they have no idea what they should be benchmarking against. If they bought a share at $1 ten years ago and its now worth $1.20 they have done “pretty good” – even though it’s gone backwards against inflation and against any benchmark + also failed to keep on track to achieve their retirement goals, etc, etc.

Jo Heighway
March 05, 2016

Alex you raise an interesting point. Sometimes taking the time to listen to people's SMSF stories is a great opportunity to provide better more targeted education in a way that is more personal. When advice or education is tied to a specific story that you can directly relate to, it makes much more sense.

 

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