The average monthly hours spent on SMSF management increased from 6.3 in 2014 to 8.4 in 2018, the CEO of Bell Direct, Arnie Selvarajah told the Nest Egg podcast team.
That’s equivalent to a third, and Mr Selvarajah puts that down to increased compliance and regulation requirements.
“If you drill down into that 8.4 hours, more than half of that is actually just on admin,” he said.
“So the trick here is how do you spend less time on admin and more time on actually getting better performance?”
Mr Selvarajah said a lot of trustees still carry the administration burden themselves, and said a technology assistant could free up four of those hours.
“If you think about the economics of that, if the average portfolio balance in an SMSF is $630,000, if they could improve the return by 1 per cent, that's six and a half hours and just under $6,500 a year,” he said.
“Multiply that by every year that you've got between now and retirement. That's a lot of money that you're leaving on the table by not focusing on the right things. There are investment admin solutions now available for $1,500 a year, everything included.
“So I would really encourage people to look at where you spend your time and really focus on the things that are going to add value to you, which is really around getting better performance out of your portfolio.”
Mr Selvarajah said one of the key things for SMSFs to remember is the need for an objective. Finding the objective can mean sitting down and considering the realities of the fund, time until retirement and what trustees will need upon retirement.
“So what does the fund need to be at the time that you retire? That should give you an indication of the average return you need to achieve in your fund over that period of time,” he said.
“A lot of people basically are in a hit for the fences every time they place a trade, but if you do the numbers, it'd be quite surprising to you. The average return you need to achieve in your fund only really needs to be 6 to 7 per cent per year, so that's not a large number.”
Mr Selvarajah said if investors focus on that average return, they’ll avoid the danger of chasing high returns.
“High returns also mean high volatility and the way to kill your performance is to lose money. It's better to make zero return then to lose money, obviously,” he said.