Certified Financial Planner professional, Matt Hern has three times been awarded as one of Australia's Top 50 Financial Planners by The Australian Financial Review Smart Investor. He is passionate about guiding you on the right financial choices to achieve what you really want. Matt Hern is an Authorised Representative of Charter Financial Planning Limited AFSL 234665. All information is general advice only.

18 responses to “Why you don’t need a SMSF”

  1. Neil

    Thanks Matt for this balanced appraisal. Its a good summary of the pittfalls that many unsuspecting Super clients are dragged in to usually by the friendly accountant.

    The Henry Report may go part way to aleviate this. I agree there is plenty of retail offerings in the market place to to keep confusion out of the Super excercise and help simplify investing for one’s retirement.

  2. Kat

    Not sure i agree it’s balanced when you start the article with “why you DON’T need a SMSF”. Whilst i agree there are pitfalls and some funds permit you to choose your specific investments, having an SMSF provides FAR greater control. Name me one fund manager whom I can ring in the middle of the night to get my exact portfolio value, calculate the gains and losses including CGT and instruct them to sell / buy shares but only if the trading opens at a certain price. There is far more control in being able to immediately place a buy or sell order directly with the broker and see it being filled within two minutes than there is sending an email or fax to a fund manager who may or may not be staring at their email / fax machine and who may or may not have a coffee break before placing my order. On top of that, the fund manager then charges me to key the exact same things I can key myself plus I have to pay his fees regardless of whether he makes me any money! I have been running my own SMSF for five years now and can assure you, if I can do it anyone can. I don’t have any accountancy experience, I’m not a financial advisor or even a basic bank teller; in fact, I have trouble working out all the buttons on my TV remote control. But with a bit of patience, it is relatively easy to read the ATO and other website’s publications and run your own super. I think you do the average person a great disservice by stating they DON’T need an SMSF – perhaps if you had written “MAY NOT NEED”, I would have more respect for your opinion.

  3. Ken

    Matt I found your article an interesting read but Im afraid that I have to agree with Kat for much the same reasons. Ive had an SMSF for approx 5 years and after being regularly done over by the existing funds which handled my workplace super before retirement I can honestly say the SMSF route has proved more beneficial to me.
    1.Access is easier,
    2 If you get a good accountant to organise the necessary compliance audits it is much more reasonable from a cost point of view. Ive had very fancy companies doing the audits initially (mainly due to being the new kid on the block) as a safeguard but it wasnt good value for money and caused me a lot of extra unnecessary work. They forgot that I was the customer and assumed that I worked for them despite giving them very detailed account information and paperwork. Not a good outcome Im afraid.
    There are good people out there to do compliance auditing so I would suggest that people check them out on a regular basis to keep the situation competitive.
    Overall SMSF has been a good experience for me despite some of the pitfallsand a bit of a learning curve along the way.
    The Henry report may change this a little but that remains to be seen.

  4. David

    Hmmm let me guess … Kat’s a teacher and Ken’s an engineer?

    There’s also the dangers of uneducated members determining their own asset allocation and selecting investments. If you need to ring up in the middle of the night to check the balance or adjust your investments then perhaps you are worrying too much.

    On the other hand direct property can be a great reason for SMSFs.

    Too often I’ve seen SMSF’s offered as a solution only to increase the Accountants income.

  5. Nathan

    As a representative of a wrap-account provider (that is not owned or controlled by a bank), I can confirm that we have a number of SMSF clients who happily use the investment version of our product to manage part or all of their SMSF investment portfolio. Our online functionality makes it easier for investors to choose and manage their investments (including share trading) and it is available 24 hours a day. Our consolidated tax reporting also keeps the accountants happy at the end of each financial year.

    On the topic of investment choice, we offer over 250 managed funds across numerous asset classes as well as ASX-listed securities (including ETF options) through our Direct Share Choice option.

    On the topic of fees, our product has a capped admin fee for balances over $500,000. And if you were to combine this with our fee aggregation facility (i.e. linking family accounts), you will not collectively pay more than this maximum fee. The maximum admin fee on our product is $3,500 p.a. for clients wanting access to managed funds and direct shares.

    Admittedly we do not offer access to illiquid assets such as unlisted or business real property, but for the majority of investors, access to direct shares and managed funds is sufficient to more than achieve their retirement goals (with the right advice). So I tend to agree with Matt on his article based on what is appropriate for the MAJORITY of investors.

    I guess my main point is that retail super funds are not out to bleed their members dry and we offer a great deal of investment choice and online flexibility.

    As a final thought, if you MUST have a SMSF but it is not desireable or possible for you to be the trustee of your own fund, it may be worth considering a small APRA fund (SAF). Typically it has all the makings of an SMSF (including the ability to add business real property to your portfolio) but the trustee responsibility is borne by a professional corporate trustee. SAFs may be suitable for investors who feel that they do not fully understand the responsibilities of being a trustee or cannot be a trustee due to bankruptcy or non-residency for example.

    Thanks for your article Matt. There is a lot of hype about the virtues of SMSFs and it is good to stimulate some debate.

  6. Charles

    Hi Matt. Enjoyed Your article. Could you please give me an idea where to get an answer to my problem? I’m retired 62, have a SMSF costing me well over $3000 in accountancy/admin fees, plus the hassle of preparing info each year. I only invest in TDs and online share trading. My thought is to close out the SFSF and split the funds into wife(57yo ret.) and my names as simple personal tax using eTax. How do I work out the break-even investment return amount at which we would have to pay more than $3000 combined personal tax as two retired investors?
    Any help would be appreciated. Thanks.

  7. SMSF Guide

    […] is often not needed to get the level of control you desire. Read my earlier article to discover when you may or may not need a SMSF. Found this article useful? Then please spread the […]

  8. Karl

    Given the performance of most active funds, would it be that hard for a SMSF to perform better? A term deposit or government bonds seem like they would have performed better over 10 years….

    From APRA:

    “In the ten years to 30 June 2010, the average ROR for large funds was 3.3 per cent per annum. Public sector funds recorded an ROR of 4.2 per cent per annum, corporate funds 3.9 per cent per annum, industry funds 3.9 per cent per annum and retail funds recorded 2.5 per cent per annum.”

  9. Karl

    I understand re the buckets.

    I guess what I was trying to get at, is if you want to go with cash and index funds, then is it that hard to do a SMSF? while these options are available in superfunds, you may be able to do it youself just as easily and possibly with lower fees (ie Ubank and vanguard)…

    I understand that there are SMSF support structures out there that can audit etc a SMSF for around $700 per year… So depending on your funds, that doesn’t necessarily equate to significant costs (ie to warrant someone needing a $1,000,000 before setting up a SMSF).

    I agree with you, re superfunds offering a fast variety of products and can manage for very low fees and probably mean that a SMSF isn’t necessary. But I think that SMSF isn’t necessarily that hard or expensive…. It is an interesting and complicated debate and I guess depends on what people want to achieve.

  10. Cost of a self managed superannuation fund

    […] So if you are considering a SMSF you need to have a much better reason than saving money. Read this article for an insight into when a SMSF may be appropriate. […]

  11. David H

    Thanks for the interesting article. Any return must clearly have costs deducted from it to ensure you see the real return. I am curious though. I attended a seminar that sold the benefits of SMSF in buying highly selective property. It indicated that the SMSF could borrow from the bank, have the loan repaid by the fixed super contributions paid by the employer, the rental from the tenant and any tax benefits received through gearing. It certainly seemed to make lots of sense, as most Australians turn to property as their most favored investment and the constant state of turmoil within the external economic market. Seeing the costs to run the fund were deductible anyway, providing the property choice was highly selective & appropriate it seemed to make sense. What am I missing? I also assume that MOST (but not all) financial planners don’t like SMSF because it erodes their income streams (sorry for being so blunt) but I always look at the ‘intent’ behind any advice to determine if their is any underlying issues. Thoughts?

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