Is It Worth Managing SMSF On Your Own?

Is It Worth Managing SMSF On Your Own?

Self-managed super funds (SMSFs) are seen as one way to take control of investing for your retirement. There are opportunities to generate better returns at lower costs and help trustees or SMSF members to invest in a wide range of investment opportunities or assets than a retail or industry fund. According to statistics, around 30,000 new SMSFs are established each year.

The disadvantages that SMSF can bring is on the complexity of satisfying compliance obligations, costs involved in setting them up and the lack of investor skills in managing SMSF investments on your own.

There are things that support SMSF trustees in running the fund.

Running and managing SMSF is complex because you are taking charge of your retirement future. Rules, structures, and decisions become more complex than those handled by a super fund regulated by the APRA. This is why SMSF is not for everyone. Those that thrive on this kind of challenge, running and managing SMSF can be very profitable or rewarding.

When considering if an SMSF is good for you, it is valuable to examine your life stage and the typical SMSF investor. SMSFs involve several life stages and experiences. Stages involve those starting out, to those who are well into the accumulation phase (children’s education or post mortgage) and those entering their retirement age. Depending on your situation, it is important to ask if you have time and the capacity to focus on managing SMSF on your own.

The investor profile influences that advice you need, how your fund is administered, the investments you make and the cost of running the fund.

What kind of investor are you?

According to research conducted there are four distinct kinds of investors.

  • The Outsourcer who look for the one-stop shop or do it for me investor.
  • The Coach Seeker who looks for advice. These are usually younger investors and more women.
  • The Controller. These investors like to do things for themselves and seek information to support their decisions, mostly business owners. These have the highest income of all segments.
  • The self-directed. These investors are characterised by older, male and business owners or ex-business owners.

Compliance requirement of an SMSF.

Fully understanding the laws and compliance requirements of running an SMSF is very challenging. Getting good advice from qualified people can be of great help in avoiding contraventions. The four types of contraventions make up about 70% of all ACRs. These include:

  • Loan to members and providing financial help to related parties,
  • In-house assets,
  • Separations of assets,
  • General administrative contraventions or violations.

ATO said that they are paying close attention to the SMSF sector. It is looking into arrangements and tax schemes, which it believes are attempts to avoid or lessen the impact of new superannuation rules, including the transfer balance cap.

The watch list focuses on funds that have:

  • The appearance of being set up for wrong reasons like to improperly access super balances,
  • Outstanding lodgements that are or not properly audited,
  • Uncorrected regulatory violations,
  • Low-cost or cheap audits that do not satisfy required standards,
  • Apparent non-commercial deals.

Today, ATO is also focusing on false arrangements that involves SMSF investments in business ventures and property development. It believes that these could possibly trigger to the arm’s length and sole purpose test provisions. It is also focusing on ensuring compliance with new collectible rules.

Investment decisions. Making decisions on where to invest funds into is also a challenge. Factors that can influence investment decisions include:

  • Challenging market conditions, especially during downturns in the market. When markets are under stress, investment decision-making becomes more difficult.
  • Lack of experience in investing or bad experience with an investment
  • Too much information from too many sources and few ways to gauge the reliability of the information or information overload.
  • Changes in government policies.

Having a clearly defined, diversified long-term investment strategy is the best defence against uncertainty.  An effective investment strategy should help guide you and the fund through uncertain times. It is also important to remember that superannuation is for the long-term. From start to end, it can potentially last for up to 50 years.

Good investment strategies keep members disciplined and focused on the long term. Revisiting and possibly revising the circumstances and purpose of the fund as well as its members, every year or 12 months can be a reliable way to understand the initial objectives and possible outcomes for the fund and for it to remain important and achievable.

Securing the best advice.

In an SMSF, trustees do not have to make the decisions about the fund on their own.

According to research, about 80% of SMSFs use at least one adviser. And from this 80%, 37% use more than one adviser.

Getting advisers who are specialists, licensed and capable of meeting the specific needs relevant to managing SMSF at the time you need it is very important. This advice needs range from setting the investment strategy and building a diversified portfolio, compliance to the law and taxes that have to be paid and estate planning.

Advice is important when the fund is at the point of moving from the accumulation to pension phase. This is the time when many investors who have become comfortable in investing for growth during the accumulation phase need advice on how to generate sustainable income from a more defensive portfolio and when trying to maximise tax benefits without sacrificing growth opportunities. However, the search for this advice is complicated by the impact of licensing of accountants.

Starting July 1, 2016, accountants who wish to provide advice to SMSF clients should be authorised by an Australian Financial Services Licensee (AFSL). This caused some accountants to form partnerships with licensed advisers. Another trend is the emergence of SMSF administration entities that manage the funds’ investments, and take care of compliance requirements.

A growing group of SMSF specialist advisers also understand and focus on the advice needs of SMSFs. Automated advice that has no human involvement also allow advisers and their clients to access cost-effective investment platforms to help boost the advice experience.

Conclusion. There are no perfect profiles of SMSF investors but the growth in the number of SMSFs and their balances is evidence that many investors have become successful in managing SMSF.

Technology has also made it better to effectively outsource the compliance workload but not the trustees’ obligations. This can reduce the costs of running and administering a fund and help provide access to more information, faster and at a cheaper or lower cost.

Developments in product innovation like exchange-traded bonds and exchange-traded funds make it simpler to obtain asset classes that were, in the past, difficult or too expensive to access. These include international shares, commodities, fixed interest, and infrastructure. Automated assisted advice about managing SMSF is also expected to open further opportunities in the future.

Self-directed options sometimes may not fit your lifestyle. Sometimes time constraints caused by working full time or running your business can cause time pressure that can make satisfying requirements difficult. Others invest in an area where they can rather monitor with minimal participation and leave day-to-day decisions-making to a trusted adviser or advisers. Researching your options for managing SMSF will help you make an informed choice when you are ready. You may also seek advice from a professional or an SMSF auditor to help you make the right choice.

Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit,  and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.

Call our Melbourne team today on 03 9088 2242, or email us via

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