Desire for control does not justify SMSF

2 February 2016

Investors who opt for self-managed super funds (SMSF) are not necessarily doing it for the right reasons or making the best use of it, according to Perpetual Private.

Senior manager, strategic advice, Colin Lewis, said that while control motivated members to establish SMSFs, it was not the most optimal option if all they did was sit in cash, fixed interest a few shares and managed funds.

"You could've done that in the retail space, so why are you taking on the additional complexity and responsibility of running your own fund?" Lewis asked.

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They should be advised to take active positions given the market situation at present.

He also said the SMSF market was largely driven by accountants in the past, and they had a vested interest as they could do the accounting and the auditing, for which they charged extra fees.

It was then a set-and-forget, where many members did not actively pursue how they should appropriately invest in their SMSFs to maximise their returns.

"Basically anybody with any sort of amount of money, their first approach to the client is ‘oh we need an SMSF'. Well in fact do you?" Lewis said.

Members should opt for an SMSF only if they wanted to invest in something that was not available in the retail space such as direct property, which they might want to do through a limited recourse borrowing arrangement.

They should do a cost-benefit analysis, and compare it between being in a retail fund, industry fund or an SMSF, while taking into account the cost of running the fund and the advice component.

"I'm not being anti-SMSF. I think those are the sorts of dynamics in thinking about it rather than just saying, ‘oh well an SMSF will just achieve everything for me'," he said.

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Interesting to see Perpetual arising as the fountain of knowledge that accountants are the reason for the smsf growth. Meanwhile back in the real world of Trustees, SMSF's are 'probably' just looking for low risk maximised returns without all the high fees charged by managers that underperform the index after fees. last time I checked, being in cash for most of last year overcame volatility and wasn't a bad call. Better we focus on the issue to hand and challenges of securing Trust in investment managers than bagging accountants methinks.

If Perpetual think that you can get the same control in a retail fund, they're deluded.
Try and invest more than 30% in a single fund such as an index tracker etf or sell an investment to fund another only to find you have to wait for the funds to arrive before you can put a buy order in again and you'll soon see the reason why retail want more control.

Their view is it's their money and they should be able to do what they want with it.

Whether it's right or wrong, they earned the money and i can see their point. That's why they want control.

The reason so many people like SMSFs is they can see how easy it is to outperform diversified super fund managers. They just look up last year's asset class performance tables and say "if I had an SMSF I could have switched it all into {insert last year's best performer} and would have got much higher returns!".

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