Investment Strategy Reviews
As part of the Stronger Super reforms, new legislation has been introduced requiring trustees of self-managed super funds (“SMSF”) to conduct a formal review of their fund’s investment strategy on a regular basis.
Most SMSF trustees will know they have been required to maintain a formal, documented, investment strategy for some time. However, previously there was no requirement that you actually review and reconsider the strategy from time to time (so long as you complied with the one you had, you met your legal obligations).
However you are now required to ensure that you are regularly reviewing and reconsidering your investment strategy taking into account various factors including the funds performance, liquidity (cash) requirements, the life stage of members, etc. The term regularly is not defined at this stage, however prudence would suggest the investment strategy should be reviewed at least annually. The strategy does not need to change every time it is reviewed. However trustees should maintain an awareness of the investment landscape and make adjustments to their strategy to fit any change in the circumstances.
To provide evidence of investment reviews trustees should document the decisions made (including the decision to make no changes if that is the case) in the form of minutes of a meeting and retain those minutes on the fund’s Permanent Register.
New Requirement to Consider Insurance Requirements
There is also one new matter that trustees are now required to consider when formulating and reviewing their fund’s investment strategy…
This is whether the fund should hold insurance (generally Life, Total and Permanent Disability and/or Income Protection Insurance) on behalf of its members and if so how much.
As above, the decision regarding the implementation (or otherwise) of such insurances should also be recorded in minutes of a meeting.
How We Will Help Trustees Comply
Our Clients with SMSFs know that we already maintain a Permanent Register for all of our funds which contains all the original permanent documentation as required to comply (including the formal investment strategies and minutes of meetings). In order to ensure our funds are meeting these new requirements we will be contacting all affected Clients during the fourth quarter of 2013 to arrange a formal review of their investment strategies and to undertake an analysis of their insurance requirements. We will then arrange the preparation of the necessary documentation including signing and maintaining on the Permanent Register.
If you would like to discuss the matter sooner, by all means contact our office, however if we don’t hear from you we will be in touch prior to 30 June to address this matter.