Robo Advice for your SMSF
Digital investment advice is encompassing the activity of investing through an SMSF.
Need for robo advice in your SMSF
Robo advice can help you better manage the investment aspects of your self-managed super fund (SMSF).
By setting up your SMSF, you have chosen to take an active interest in saving for your retirement. You have prepared yourself to become a trustee of your SMSF, and have agreed to comply with superannuation and tax laws. However, making apt investment decisions is intellectually hard, and it is time-consuming to hone your investment expertise.
By understanding the Personal Circumstances of all the trustees of the SMSF, a robo advice solution can suggest suitable portfolios for your SMSF. The best interests of fund members are kept in mind while preparing the Statement of Advice, and while managing the investments through your SMSF.
Investing your superannuation through robo advice
At present, you can invest your superannuation with a robo adviser in Australia by setting up your SMSF and then utilising the services of that digital advice firm to manage a portion of your SMSF.
Delegation of investment activity of your SMSF
At a fundamental level, robo advice is about delegation of investment activity to investment experts, who use interactive interfaces and algorithms to provide a high-quality, cost-effective service. As you set up an SMSF to take control of the act of managing the investments of the SMSF members, you can actively choose to delegate the function of investment activity to a robo advice service. As long as the robo advice solution functions in the best interests of the fund members of your SMSF, your decision continues to be in line with your role to act in the best interests of the fund members of the SMSF.
Using robo advice for a portion of your SMSF
It is not necessary that you would need to let the robo advice solution to manage all the amount in your SMSF. You can actively decide how much amount in your SMSF is managed through robo advice. By doing so, you will not be delegating the investment activity of the rest of the amount in your SMSF to the robo advice service.
This flexibility will enable you to make decisions that are most suitable for the fund members of the SMSF. For example, if you think it is in the best interest of the fund members to invest part of the amount in the SMSF in a residential property, then you can go ahead to do so. You have the option to delegate the investment activity of some, or all, of the rest of the amount in the SMSF to robo advice.
Diversifying the portfolio of your SMSF
Irrespective of the structure of an investment portfolio, in this case your SMSF portfolio, it is always prudent to diversify the portfolio across various asset classes. As a trustee of your SMSF, if you have a strong inclination towards one particular asset class and you go ahead to invest heavily in that asset class, then it is prudent for you to consider to highly-diversify the rest of the SMSF portfolio.
For example, if you, as a trustee of your SMSF, are opting to purchase a residential property, then there is a high possibility that your SMSF portfolio is over-exposed to the Australian property asset class. In such a scenario, the need to diversify the rest of the amount in your SMSF becomes more important. Because a robo advice solution invests in a highly diversified portfolio, you can opt for robo advice for the rest of your SMSF portfolio. This will enable you to improve the overall diversification of your SMSF portfolio.
Investing in cryptocurrencies through your SMSF
We discourage you to invest in cryptocurrencies through your SMSF. We believe that, as of now, investing in cryptocurrencies is a venture bet, and someone should not invest in this asset class if she is not comfortable with the realistic possibility of losing all her investment in it. Your superannuation wealth is critical to your quality of life post-retirement, and hence it is not prudent to expose your superannuation wealth to such risky venture bets.
For more information, please refer to our insight 'Investing aspects pertaining to cryptocurrencies'.