Superannuation Returns

[Prospector]

Hi all
I am curious to know what return people would expect from their Super Fund (whether DIY or managed) for the last financial year (04/05). I am meeting with the accountant tomorrow so would like to get some perspective on how we have performed.
All information is very welcome!

 

[Happy]

From what I know, Super Funds aim to be better than index or at least match the index.

 

[macca]

I guess it would depend on the structure and rules of the fund.

For example, if it was a fund that invests in term deposits then it would return differently than a fund in OS shares, which would be different to a fund in Oz shares etc etc.

If it is a balanced fund it may return poorly on its OS %, about 6-8% on its fixed interest % and have done well on its Oz market component.

If we say 20% on 33% of the capital, 8% on another 33% and nil on the OS shares it would average out at 9.3% less management fees.

Thats why I just plug along with my Oz stuff

 

[Duckman#72]

Hi all
I am curious to know what return people would expect from their Super Fund (whether DIY or managed) for the last financial year (04/05). I am meeting with the accountant tomorrow so would like to get some perspective on how we have performed.
All information is very welcome!

Hi Prospector

As others have mentioned - number of issues to think about. But mine clocked in at 16% last year. Mine is growth driven rather than income driven. I haven't calculated an estimate for 2006 yet but return from shares currently 23% (non-annualised) without taking into account geared global managed fund which has been rocketing. What did your accountant have to tell you? And did you have a go at him about the fees like you previously said?

Regards

Duckman

 

[Julia]

Hi Prospector


Last week I signed off on last year's accounts prior to them going to the auditor . The result for that year was 38.7% which I felt OK about, given that it included five companies that I had foolishly accepted recommendations to buy from a full service broker when I was still dumb enough to believe their commissions were money well spent and didn't have enough faith in my own judgment to stick with my own choices.Swallowed hard and sold with substantial loss in each case.

This year is looking very good so far and should reflect better performing portfolio. Still, it's only April and much can happen between now and 31 June.

How did your year turn out?

Regards
Julia

 

[Julia]

Just a further thought on the net return of super funds.
What I've been talking about is a self managed super fund. It is 80% invested in Australian shares. Therefore it could not be considered as an alternative to a "Balanced" managed fund which will include more fixed interest and probably overseas shares.

Imo one of the many advantages of running your own fund (given sufficient capital) is that you can switch your asset allocation according to the prevailing most profitable asset classes. e.g. why would you want to put a large proportion of your funds into, say, term deposits at less than 6% when you can have them in the ASX where in addition to that much in income, you can grow your capital by many more times that in a bull run such as we are presently experiencing.

Even in a downturn in the market, stocks such as WOW will still do OK and continue to pay reasonable fully franked dividends. Likewise counter-cyclical stocks like UTB etc which usually flourish when people are seeking comfort and think they might have the big win.

Julia

 

[Prospector]

Hi Prospector

What did your accountant have to tell you? And did you have a go at him about the fees like you previously said?

Regards

Duckman

He he, great memory Duckman! Well, grab a cup of coffee and sit back and relax and I will take you through it!

As you obviously recall I had fees issues with my accountant. As a bit of history, he bought my former (lovely) accountant's practice when the latter was going through some rough patches with a divorce, and the GST was being rolled in, so he needed to get out of the business for a bit and the new accountant took over our affairs. It was our original accountant though who we liked and trusted - 10 years ago he said we should do DIY super which was great advice. He also didnt charge like a wounded bull. Yet he did all the reconciliations etc etc (pre GST) He also feeds us information about other people's rage about the new fees being charged so that gives me some confidence in challenging them.

Anyway, the new Accountant, after doing our Company and personal returns charged us double what I felt was appropriate, so I wrote him a letter, explained my rationale, and sent a cheque for this amount - approx half!. This was in December last year. The accountant rang in Jan to organise a meeting to discuss the bills, but partner and I managed to avoid having a meeting until now, and by then they had banked the cheque.

However, the Accountant still had to complete the Super Fund accounts. When giving them the paperwork in March this year, for the Super Fund I had told them that I would not pay more that $3000 to do the Super Fund returns unless they contacted me to explain cost issues.

Basically they wouldn't give us the completed Super fund file until we met to discuss their fees - (it was done in a pleasant manner but the underlying threat was there!) That was last week. I insisted my partner (husband) was there too just in case it got nasty.

My current accountant is a say, 58 year old man, with ruddy cheeks (not like Father Christmas) - a kind of traditional accountant who obviously likes his red wine during and after dinner port. I suspect he doesn't deal with too many women except in a secretarial capacity. His accountants are all male. He brought the more junior accountant with him who had done the work. He is a sweet guy in his early thirties whom I suspect is quite competent but not good at explaining the details.

Well, they gave us our paperwork and their account, (which was, coincidentally less than the amount I had agreed to pay), then we got on to the fees. Of course they gave their talk about why the fees were so high, I had share traded - (like that was a real no no - "all these share transactions -tut tut"- I use MYOB and portfolio planner that gives them all the info they need!)

Then they mentioned that they charge as a 'group ' (we have several companies, some of whom are jointly owned with other people). They have an amount that they charge the 'group', and this invoice was basically for the balance of their charge as a group! To which I responded that meant that partner and I were paying too much for our return simply because they had undercharged another company that we share with an independent third party!

Hm, they didnt like the sound of that response so they went into damage-control mode explaining the complexity of our business. I said I had calculated the likely tax position, and I was within $10 of their professional return (I am not good at working out depreciation) and none of my BAS needed changing. And I have no accounting experience whatsoever! Complexity, Bah humbug!

The I asked about the IAS statements/payments that Odduna helped me with recently in another thread, and just wanted to confirm that I was doing was OK! Well, they looked at each other like I was talking another language saying no, you cant do that. I said I had talked to the ATO and they said I could! So they rumpled their papers and said they would get back to me!

Then I set them up a bit!. I queried them why, when they sent us an ASIC return for each of our companies, three times (out of 6) our address was incorrect and it had to be redone! To which they replied they merely receive the information from ASIC then pass it on to us to double check and they dont actually do anything with the forms, just pass them on to us. OK, then why do you charge us $220 EVERY time just to put the form in the mail to us :swear: For our set up that is an additional $1320 a year in accounting fees.

I have this feeling that having had this discussion they may well try to send us another invoice for the balance of the initial one. Too late, they banked the first one which was attached to the letter saying I would not pay any more!

My partner just sat there as he doesnt worry about the figure work as he leaves it to me! He said later I was just his handbag!

Then I thought, may I had been a total b%$ch - you know, crossed that line between being assertive and aggressive - hard for women to judge really!
To which my partner said obviously I hadn't realised that I had totally intimidated them because a) I was female b) in reasonably good nick c) knew what I was talking about and d) was challenging them about something they were the experts in but didnt know the answers! Hm, that made me feel good!

Phew, done!

Now back to the original topic. My returns after costs was 11.9%. I was initially disappointed in that but then I realised that this was for last year's return, and I had only traded for about 6 months of that year (and this was my first real foray into trading too!) And they had also undervalued our investment land by using not even council valuations, let alone market price, by about $40,000 Should I query them on that?

I have done quite of bit of trading in the Super Fund as I too have tried to maximise growth rather than income at this stage - still accumulating. So that means I sell when the growth seems to have run its course. So I do a few trades over the year. But the accountants act like this is not what I should be doing but looking traditionally at income - dividends. What do you think? Then again, they thought we were crazy buying land, but the fact that it has increased in value by 120% in 3 years seems to have escaped their scrutiny!

So both you and Julia have done brilliantly - thinking of branching in Investment Advice!

 

[Julia]

Hi Prospector,

What an entertaining story. Sorry, that's probably a bit tactless given that you have undoubtedly found the whole saga pretty stressful. It's just so good to hear how you stood up to them. I wouldn't worry about having crossed the line from assertive into aggressive. You needed to stand up for yourself and you did so in an enviable fashion. They will have just been shocked out of their socks that anyone - especially a woman, for heaven's sake - would even have the temerity to question how they do things or what they charge. Good for you.

Extract from your post below:

"....also undervalued our investment land by using not even council valuations, let alone market price, by about $40,000 Should I query them ..."

Absolutely. How did they value the land - just pluck a figure from the air?


I don't have any investment property of any kind these days but when I did I provided a valuation to the accountant which they then used.

You can't really judge your last year's return given the circumstances of only six months etc.

I'm also a bit surprised to hear that your accountant is querying your decisions about whether to trade/invest/use companies that provide maximum yield rather than growth. I'd consider that outside the brief of my accountant.

Perhaps it's time to go and have a chat to a few other accountants and see how they come across to you. Doesn't sound as though you'll ever be able to have a relationship of either trust or liking with this character, and imo both qualities are essential in one's accountant.

Keep us posted.

All the best
Julia

 

[tech/a]

Think it depends on the overall general returns one could expect.
Of the last 6 mths 30% in the markets.
Of the last 7 yrs had you been investing with a SMF in Property then 30%+
If times alter to the downside then to expect out performance from any fund SMF or other wise would be asking to much.

Underperformance is simply not acceptable in times of the best boom in R/E for 15 yrs and the strongest bull market possibly ever seen in the AUST markets.

So I guess the question is what do you benchmark returns to?

A bigger question I would be asking is how can I control my Super if things turn flat or turn against me.I think its more important to be able to control adverse loss in a super fund than even gain.

 

[Prospector]

Thanks to everyone. I have another query about returns - do you include contributions (eg employer, salary sacrifice etc etc) when determining the % increase? The accountant said you dont use the contributions but am thinking that might not necessarily be the case, iykwim

Also, if a super fund went from say $50K to $300K in five years, (no, this isnt my fund! ) that is a 500% return overall, but is it 100% annualised?

(Guess who didnt do well in maths!)

 

[Julia]

Thanks to everyone. I have another query about returns - do you include contributions (eg employer, salary sacrifice etc etc) when determining the % increase? The accountant said you dont use the contributions but am thinking that might not necessarily be the case, iykwim

Also, if a super fund went from say $50K to $300K in five years, (no, this isnt my fund! ) that is a 500% return overall, but is it 100% annualised?

(Guess who didnt do well in maths!)

Yes, you bring up some really relevant points which indicate the difficulty of comparing our various returns. When I read your post I flicked through my year's return and I see that the accountant has included an undeducted contribution I made to the fund and also deducted another amount which I withdrew to supplement my present income stream which was $2000 less than the undeducted contribution.

So, although that only happened once in my case if it were to happen frequently and the contributions/deductions were to be of very disparate sizes, then it's going to be difficult to compare that with a fund which only counts growth on existing shares, dividends, interest, franking etc, minus capital losses and any other legitimate deductions.

Say, e.g. your land referred to earlier, Prospector, was held outside your SMSF and you decided to sell it and add the proceeds to your SMSF, then would that value be added to your percentage increase in the total value of the fund over the previous year?

Someone will know the answer to this, as well as the question you posed in your last paragraph which I too would like the answer to, being pretty hopeless in the maths department.

Julia

 

[Duckman#72]

The accountant said you dont use the contributions but am thinking that might not necessarily be the case, iykwim

Hi Prospector

Your fund sounds a bit like mine. Not doing that much in the 2004/5 year but
a lot of activity lately.

Thanks for your story and sorry I have taken so long to respond. In answer to your question - generally no - contributions are not themselves taken into account in calculating return %'s. However you do need to take into account the asset base in the fund. For example if you made a $50,000 contribution on 30 June you wouldn't take that into account when working out return on assets but if you made it on 31 December then you would take into account the half year it was available for investment.

As for the valuation - you are supposed to have the land valued at least once every three years.

Anyway sounds like you have been having fun!!! Anyway now you seem to be in the driving seat.

Regards
Duckman

 

[hardmoney]

Julia,
I solve the cash flow in to my SMSF by unitising the account.I calculate a unit price on the fund balance at the end of each week in my spreadsheet.This solves a range of issues, including the correct balance totals for my wife and myself and I can just chart the weekly unit price to work my fund performace sans cash-flow.When a contribution comes in each month I just issue new units to the member.Takes about 2 mins to do.I plan to take advantage ofthe new contribution splitting rules this year and so unitising will make this easy as well, just a spreadsheet entry.

Fund performace well my core stock portfolio is up about 20% and my trading portfolio is up 43% as of the close today.


Rgds,

HM

 

[Julia]

Hello hardmoney

Thank you for the suggestion. I need to use spreadsheets more - just not always entirely sure what I'm doing! I pretty much just hand everything over to the accountant.

Congratulations on both performance results - great going.
When we look at performance at end of June each year, that's of course an arbitrary date. A few weeks before and/or a few weeks afterwards it can all change quite markedly. Later in the calendar year, my result fell away, but has built up well this year.

Julia