Super Dilemma: Should You Start a Self-Managed Fund?

Super Dilemma: Should You Start a Self-Managed Fund?

So why not apply this philosophy when it comes to my super investments, which are much larger at around $350,000? And why shouldn’t I pay the ultra-low fees I pay for my non-super investments, which are as little as 0.09 percent in some cases?


Honestly, it’s enough to finally make you wonder if it’s really time to set up an SMSF.

The logic of SMSFs is clear, especially for larger balances. Of course, in the APRA-regulated area of ​​corporate and retail funds, fees are charged as a percentage of your total balance, which naturally grows with your balance over time.

However, in the SMSF space, you can often pay a fixed annual amount in dollars to have your fund managed.

For many people, this means hiring an accountant or financial advisor to oversee the administrative needs of their SMSF, including audits and tax returns, which can result in thousands of dollars in annual costs.

However, in recent years, many low-cost SMSF management companies have sprung up, such as: B. eSuperfund and Stake, which charge around $1000 to set up your SMSF and meet ongoing audit and tax obligations.

I don’t think I’m ready to take the plunge into SMSF just yet – but I’m keeping it an option.

As a percentage of my current super balance, that equates to just a 0.29 percent annual management fee (which would only go down as my balance grows). It looks pretty attractive at first glance.

However, this figure does not include the investment costs I would actually incur when investing my money through my SMSF, including brokerage fees for share purchases and ongoing management fees for underlying investments. But again, management fees for my favorite index investments are often as little as 0.09 percent.

So is it time to consider a change?

Of course, before it makes sense to look at an SMSF, there is some debate as to what exact superbalance you need.

The corporate regulator advised you to be in the region of half a million super. The SMSF sector vehemently denies this, arguing that the breakeven point is much lower for some people.

I spoke to SMSF Association Chairman John Maroney, who guarantees that SMSFs are not for everyone. But for financially savvy and committed investors, the breakeven point for starting an SMSF can be much lower, he says. “Our research over the last few years clearly shows that setting up an SMSF with at least $200,000 is possible with comparable costs to large superfunds and with the expectation of comparable investment performance.”

But Super Consumers Australia director Xavier O’Halloran urged caution. He said ATO data suggests an average operating cost of around $4000 to run a fund, meaning many Australians would be better off sticking with a large industry fund.

“The low-cost SMSF options may be cheaper, but I’d be careful with them,” says O’Halloran. “They are not subject to the same consumer protections (like performance tests and member score ratings) as APRA-regulated funds. They are also rife with inappropriate incentives to take action, which we know is not usually the route to wealth creation.”

I don’t think I’m ready to take the plunge into SMSF just yet, but I’m keeping it an option. Of course, you should always seek advice appropriate to your own situation.

In the meantime, I’m also exploring potentially lower-fee options available within the industry’s superfund sector, including ways to invest in more passive “index” stock investment options. For example, REST Super offers a passive index-tracking stock investment option with no investment fees and just a 0.27 percent annual management fee.

Lots to think about. I’ll let you know how I’m getting on.

  • The advice in this article is general in nature and is not intended to influence the reader’s investment or financial product decisions. You should always seek your own professional advice, taking into account your personal circumstances, before making any financial decisions.

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