Viridian Wealth: Origins Part 1

Who are we? Where do we come from?

No. Nothing quite that 'deep', but it sounded impressive, right?

But I did want to spend a few minutes talking about how I came to be a financial planner. Back when I was at high school I thought that working in a bank sounded like just about the best thing EVER. No, not a high flyer corporate banker; a teller. Cool.

After leaving university I went and worked in hotel management for a few years, before deciding that my earlier idea of working in a bank (better hours) wasn't too bad after all.

After working in branches for one of the larger banks in Australia for a few years, I bumped into a guy in the staff lunch room. I had seen him around, but had no idea who he was. He seemed to come and go a little bit as he pleased, and wasn't really part of any branch meetings.

After bumping into him a few times, I asked him what he did at the bank. He answered that he was the financial planner for the area. Hmmph. (I had no idea what that meant).

I asked him further about what that meant, (already the inquisitive mind) and he told me that he helped people deal with super, insurance, debt and investment, among other things. I told him that I thought that sounded interesting.

We talked a few more times, and in particular he explained that it WAS an interesting job, but took a lot of continuing education, and updating of your knowedge. He also told me that you had to want to help people. Looking back, I am glad he told me that, becasue, of maybe ALL the advice I have ever received about planning, those ones are right up there.

At that point, I started doing the Diploma of Financial Planning, and 'unofficially' helping him out. I got promoted to a different area of the bank, and then later moved from the bank, when I couldn't progress any further as a planner within their structure. I never bumped into Macca again (he never answered to Macca, as far as I know), but if by some stroke of luck he was reading this, then Thanks.

Do you have something to add. Feel free to comment. I'd love some feedback.

Warnings for SMSF Trustees

If you googled SMSF, you would find approximately 1.25 million page relating to the subject. The subject, by the way is Self Managed Superannuation Funds. An SMSF in short is a superannuation fund where the members (that's you) are also the trustees, or the the ones responsible for making the decisions. More information is available from the ATO.

The reason that there are so many pages is because it is a massive growth area, within the superannuation industry. From Viridian Wealth's view, an SMSF has a place in the 'tool kit', but there are real warnings for anyone considering them.

From my experience, the two main reasons that people want to get involved, are 'control' and to purchase property. The idea of control is an interisting one, and could likely take up a few blog posts by itself, but suffice to say, with 'control' comes responsibilities.

A recent case, whereby a Parliamentary Joint Committee looked into the Trio fraud case, found that investors who lost money after being invested via an APRA regulated fund, received compensation. Investors investing directly into the funds (including trustees of SMSF's did not receive compensation as a result of the fraud.

The PJC report goes on to say,

“SMSFs typically have more control over and choice in their investment strategy and portfolio than investors in APRA-regulated superannuation funds. These benefits of investing in SMSFs come with attendant responsibilities, one of which is to be alert to the risk of fraud and theft. Unlike APRA-regulated investors, SMSF investors do not have a professional management team to exercise this caution,” the report said.

Recommendation three of the report states that the Australian Taxation Office should include a clear, understandable, large-print warning on its website that self-managed superannuation fund trustees are not covered in the event of theft and fraud."

That brings me on to property.

SMSF's have long been a potentially effective vehicle for holding property assets, particularly for small business owners. However, over the last few years, the ability to borrow to fund a purchase via a complex arrangement called an installment warrant with an SMSF has made property purchasing and SMSFs themselves even more popular.

But again, there may be a catch.

If you were t purchase a property and do some work on it yourself, this 'unpaid work' is likely to classified as a contribution to the fund without you even realising. With changes to contribution rules, you may end up breaching the contribution limits, costong the fund significant tax imposts. If you bought the materials for any renovations yourself and charged the fund on a labour and materials basis, this may casue the Fund to breach the prohibition of the acquisition of an asset from a related party rule (S66).

If the trustee gets of all these things right, including value their services at an appropriate rate. then they may still be in breach, becasue the regulations state the Trustee can only be remunerated if  the Trustee is “appropriately qualified, and holds all necessary licences, to perform the duties or services” and “the trustee performs the duties or services in the ordinary course of a business, carried on by the trustee, of performing similar duties or services for the public”.

In the end, an SMSF may be a suitable and valueable piece of your strategic armoury, but there are many pitfalls that can be befall you, if you don't seek appropriate advice.

Please feel free to comment, or visit us at www.viridianwealth.com.au

Steve