Am I saving enough for independence in my life? That is, will I have enough for the fun things in…
Written by Cashwerkz Published: December 11 2017 Recruits
How many SMSF trustees are warned not to concentrate member investments by putting all their eggs in the one basket?
Such advice can be annoyingly obvious as intuitively most investors know an investment portfolio should be diversified.
Bank deposits make up more than a quarter of SMSF total assets. Yet how many SMSF trustees take the time to diversify deposits?
Exciting asset classes such as equities, property, and exotic fixed income securities dominate investment thinking. APRA is in the process of applying stricter liquidity standards on 15 banks to mitigate the risks generated by the complexity in their balance sheets.
The NFSR, (Net Funding Stable Ratio), will require those 15 banks to hold sufficient stable funds to meet their obligations over a 12 month period (ref:APRA Media Releases 29/09/16, www.apra.gov.au)
Domestically sourced term deposits are an important and stable funding source. The standard could favour SMSF members as the bigger banks compete for term deposits across a variety of maturities.
APRA plans to implement the standard by the 1st of January 2017. The remaining APRA regulated Approved Deposit Taking Institutions (ADI’s), such as smaller banks with traditional balance sheets, do not warrant this extra regulation.
This fact along with the federal government deposit guarantee and other long-standing prudential regulations, endow Australian bank deposit investors with practically equivalent protection irrespective of the mix of banks chosen for investment.
Under such conditions, diversification principles suggest an SMSF trustee should seek the most attractive offer. Higher deposit rates could be necessary for the smaller banks as they are not as well known as the big four.
Australian bank deposits were a safe harbour throughout the global financial crisis being governed by strict prudential regulations. The government’s swift introduction of the guarantee highlighted the paramount position held by depositors in systemic financial stability. Diversification is an SMSF requirement specified in the SIS Act (Superannuation Industry Supervision Act 1993).
Consider using a tool like Cashwerkz or consult your adviser to consider spreading your deposit portfolio for “return maximisation”.