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High interest and inflation can pay dividends for SMSFs

While much of investors’ attention is naturally aimed towards the impact on mortgage repayments, higher rates are opening massive opportunities for retirees in term deposits, bonds and lower-risk assets, says the director of a leading wealth management firm.

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Jamie Nemtsas, managing director of Wattle Partners, said although there will always be economic headwinds facing investors, the current situation is somewhat unique.

“Inflation aside, higher interest rates have changed the game,” he said.

“Those expecting 10 per cent per annum every year will be disappointed. More than ever, it is about resilience and true diversification, across country, style, and asset class.”

“A lot of younger people establishing an SMSF have a purpose in mind and that is how their journey starts – it is less likely to be about the outcome,” he said. “Typically, younger trustees want assets – usually real estate – but superannuation is supposed to be for retirement and to produce an income stream from multiple sources.

“So their journey doesn’t necessarily start correctly.”

Mr Nemtsas said it is best to avoid “simple rules” when it comes to building portfolios.

“Rather it’s about finding something you are comfortable with, but also is appropriate for your objectives,” he said.

“One big thing for us is the ‘sleep at night’ money – which is finding your number of how much you need in cash to be comfortable in your retirement.”

Mr Nemtsas said that the portfolios of the younger demographic of SMSF trustees tend to be concentrated in one thing like property trusts, and not on building a diversified portfolio.

“Financial literacy is still very low,” he said.

“People don’t understand they have to manage every cent of their SMSF and they don’t understand the need for diversification.”

Trustees have an obligation to increase their financial literacy said Mr Nemtsas, not just around compliance issues but also in regard to investment decisions.

He said he believes that there should be in an investment portfolio a regular process of rebalancing allocations to ensure the SMSF is gaining as much as it can from the investments it has made.

“Let’s say you’re a 40-year-old executive, and you’re going to work for the next 20 years, you want your capital to grow so you invest in more equities, more real estate,” he said.

“But when it comes to retirement, income is more important so how do you rebalance your portfolio to do that?

“I encourage clients to have an investment policy statement where they write down the rules of their investment strategy – things like don’t buy speculative assets, don’t buy too many shares in the same sector, don’t be overconfident, but also not to be scared when there is blood on the streets.

“You want to avoid making mistakes as they are the biggest thing that set you back from reaching your retirement goals.

“If you contribute your $27,500 throughout your working life, you will have it set, but it is the mistakes like buying too much crypto that can ruin your retirement goals, so learn from mistakes and minimise them by constantly reviewing and monitoring your investment portfolio.”

 

 

 

Keeli Cambourne
26 June 2023
smsfadviser.com

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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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Jasmine Smith

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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.

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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.

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