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Capital preservation front of mind for SMSF returns

SMSF investors will increasingly be attracted to investments offering capital preservation post-COVID, with volatile markets and lower dividends compromising their ability to meet investment objectives, according to an asset manager.

   

SMSF investors will be placing a premium on preserving their capital in the next few years, with many investors no longer enjoying the tailwinds of strong equity markets that they did in the last decade.

Cor Capital managing director David Hood said the investment environment, both domestically and globally, is high risk, whether it’s assessed from a geopolitical, economic or health viewpoint.

“Although that’s the investment reality, it’s not reflected in the pricing of risk assets. But that day of reckoning must come – the markets can’t continue to defy economic reality forever,” he warned.

“SMSFs will not be immune to any market correction of risk assets. In fact, many will be particularly vulnerable for several reasons.”

The difficulty in obtaining advice, for example, due to its rising cost and the exodus of advisers from the industry and misplaced confidence in investment decisions are two of the factors placing SMSF returns at risk, he said.

“Further, in the past decade, and despite historically low interest rates in recent years, these SMSFs have been protected by their investment in fully franked ASX that have provided capital growth and healthy dividend income,” he explained.

“It’s our contention that investors should not expect a similar performance from equity markets in the coming decade, and that dividend income is also likely to be constrained, at least for the next few years.”

Mr Hood said the combination of weaker, and, just as importantly, more volatile markets for risk assets, and lower dividend returns, will be compounded by investors often failing to be able to articulate long-term investment strategies and stick to them.

With SMSFs looking for alternative ways of generating growth and income while preserving capital, there will be a growing appreciation of the need to find fund managers that can achieve these objectives without the need for high level of complexity or costs, he said.

“After the GFC, SMSFs increasingly shied away from fund managers that had failed to deliver during that crash and charged high fees for the privilege of doing so, with the bull market in equities in the past decade rewarding that strategy,” he stated.

“But in the wake of the COVID-induced recession, they may no longer have that luxury if analysts are correct in predicting much lower returns in the next decade, opening the door for fund managers with investment strategies that aim to protect their capital, maintain purchasing power and provide alternative sources of return not tied to high allocations to equities.”

 

Miranda Brownlee
21 October 2020
smsfadviser.com

 


David Forrest Download David's Adviser Profile

David Forrest

Director
BEc (Acc), MBA, CPA, FFin

David has been in the Financial Services Industry for nearly 30 years. He was one of the founding Directors of the successful Financial Planning and Stockbroking Practice, Henderson Gregory Forrest, for a decade. Prior to that, he held senior roles in companies such as ING, KPMG Accountants and AMP. David was previously Chairman of OAMPS Superannuation Trustee Board and currently serves as an independent Board Director for several companies.

David’s extensive experience in all forms of superannuation, including Self Managed Super Funds (SMSF), Defined Benefit Funds, retirement funding through Account Based Pensions, stockbroking with a focus on Direct Share Investment, Taxation/Remuneration Planning, Centrelink, Aged Care and business management, equip him to advise expertly on all aspects of Financial Advice.

Those with a particular interest in superannuation/SMSFs, direct share investment, salary packaging or applying for the Centrelink Pension will find his knowledge and ability in formulating and implementing creative, logical and simple wealth creation strategies a valuable asset.

David maintains a strong personalised client service focus, providing tailored solutions for clients.

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David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846

Michelle Forrest

Michelle Forrest

Business Finance Manager
B Bus (Acc), CPA

Michelle’s career has spanned across the Financial Services, Retirement Living and Aged Care industries working in the private sector, not for profit and more recently with the state government for over 20 years. Her experience extends to many facets of the financial services industry, having worked in superannuation administration, technical support and financial planning practice administration.

Commencing with AMP and subsequently working in commerce and accounting roles with companies such as Brambles, Adelaide Bank Retirement Services, ECH Inc and SA Health and Wellbeing, Michelle returns to financial services after working in practice financial management at Henderson Gregory Forrest. This wide range of experience from senior accounting and management roles has provided Michelle with a strong background in business administration.

With an astute financial acumen and keen interest in business improvement strategies, Michelle ensures the smooth running of the Integrity Financial Advisory practice providing valued management support to our personalised client service focus.

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Darren Chalk Download Darren's Adviser Profile
Natasha Bartlett
Kelly Collins
Jasmine Smith

Jasmine Smith

Client Service Manager

Jasmine has worked in the financial services industry for over 12 years in all areas of client administration, working with David since 2013.

Jasmine has extensive knowledge and experience in client service including implementation of advice, portfolio reporting, assisting with the establishment of Self Managed Super Funds (SMSFs), term deposit management and a long history of helping clients with their enquiries.

Jasmine’s attention to detail, yet gentle approach, means she is able to solve the trickiest of questions for our client community.

Jasmine has gained her Certificate III in Financial Services qualification.

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Merrilyn Smith

Merrilyn Smith

Client Service Manager

Merrilyn has worked in the financial services industry for over 11 years in all areas of client administration, and is a new addition to our client services team, returning from Melbourne to join the team in June 2019.

Merrilyn has extensive knowledge and experience in client service including implementation of advice, managed fund administration, assisting with the establishment of Self Managed Super Funds (SMSFs) and process improvement for the previous practices she has worked with. Merrilyn’s experience with direct shares constitutes the other part of our administrative support for direct equity investments.

Merrilyn’s warm and caring nature continues to endear her to our clients and she has already established herself as a valued member of our team.

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