Tips, Traps and Alternatives to Insurance in an SMSF with Liam Shorte

Monday May 14, 2018

Liam Shorte is a Financial Planner and SMSF Specialist Advisor running a self owned practice. Liam has been providing financial advice and coaching to clients since 2004 having worked in financial services since 1991. 

Liam Shorte

Legalwise Seminars recently sat down with Liam to discuss some challenges and opportunities in the SMSF industry today. You can read his full responses below.

Can you tell us a little bit about yourself?

I am a financial planner and have the SMSF specialist advisor accreditation with my own firm Verante working out of the Hills and Hawkesbury areas of Norwest Sydney. I have been involved in SMSFs since 2002 when i started working in an accounting and financial planning firm. I also chair the NSW Community of the SMSF Association.

How popular are insurance holdings in a SMSF?

Insurance is becoming more popular as the age of new SMSF trustees drops to those in their 30s and 40s. A decade ago most trustees setting up a fund were in their late 50s with little or no debt but that has changed. Because Life and TPD Insurance can be tax and cost effective via an SMSF it is an important part of any strategy and indeed legislation now requires Trustees to consider the insurance needs of the members regularly.

Beyond many of the traditional investment in SMSF, why should people consider insurance?

People consider through super to ensure tax effective benefits are available to themselves and their families in the event of death or disablement. A properly structured insurance plan can provide lump sums to clear debt as well as pensions to cover living costs of surviving partners and children.

More SMSFs also carry debt now through LRBAs and look to Insurance to ensure that a property in their fund does not have to be sold to fund death benefit payments. 

What are the pros and cons of holding insurances in an SMSF?

Cost and tax effective where beneficiaries are the member, their spouse and young children.

Not as suitable where adult children are to be the beneficiaries as Insurance proceeds are often treated as untaxed taxable components attracting a 32% tax rate.

Premiums can deplete your retirement saving so you should also consider a contribution strategy such as salary sacrifice to compliment the insurance plan.

What are some of the challenges advisors facing when they choose the right types of insurance for SMSF clients?

Whether to leave current retail/industry insurances in place or replace them in the SMSF.

The balance between cover required, the fund’s budget and depletion of the retirement balance.

Assessing the needs of different age groups within a family SMSF

What are the common mistakes advisors usually make when they assist their clients to choose the insurances?

People focusing on price of insurance rather than the cover and exclusions.

Not reading the PDS and rules of insurance via existing retail and industry funds such as triggers that cancel cover automatically.

Not looking at the members full situation and needs.

What made you choose to present a seminar for Legalwise Seminars?

This is a topic many of my peers have been asking about and ASIC also have been putting a lot more attention on this area so we all need to focus on what is required to provide advice especially replacement cover advice and affordability of premiums.

Your topic will be focusing on ‘Tips, Traps and Alternatives to Insurance in an SMSF’, why is it important for accountants to attend your session?

Many accountants are new to this stream of SMSF advice and it is very important to get the specifics right not only for compliance but also because sums insured are usually pretty large so the costs of getting the advice wrong is high.

Liam believes in working with clients to take back control of their finances inside and outside Super so they can plan for a lifestyle they want now and in to the future while taking full advantages of the structures and strategies available to maximise their family wealth. He specialise in giving advice in the following disciplines: - Wealth Creation - Retirement Planning - Self Managed Super Funds - Personal Insurances - Succession Planning - Estate Planning - Direct Equities. The firm regularly runs seminars to educate clients and especially SMSF Trustees on their duties and strategies available to them.

Liam holds the following qualifications: B.Bus in Accounting & Economics; Advanced Dip. Financial Services (Financial Planning); Accredited SMSF Specialist Advisor; (SSA). Liam is a member of the following associations: Affiliate Member of the Financial Planning Association; SMSF Specialist Advisor; member with the Self Managed Super Fund Association (SMSFA).

He writes a popular "The SMSF Coach" blog at www.smsfcoach.com.au and is also NSW State Chapter Chairman of the SMSF Association.

Learn more from Liam at the upcoming, SMSF Symposium in the Primus Hotel Sydney, on Tuesday, June 05, 2018.



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