A lot has been said by the industry and regulators about the costs associated with, and the effort involved in, running a Self Managed Superannuation Fund (SMSF). As proponents of Self Managed Superannuation Funds we acknowledge the cost and time involved in running these structures, but when measured against the benefits, in most instances, the case for running an SMSF is compelling.
Before we recommend an SMSF, we go through the pros and cons with each client intensively including getting them to watch the ATO videos on the topic.
The element of control and transparency is the main differentiator between the two broad forms of superannuation structure. For those seeking either of these former functions, the SMSF will probably come out on top. As an adviser, I believe that prudent investment is not just about the risk you take but also the risks you avoid and this is where the SMSF structure allows the individual to tailor their strategy to what they require.
Don’t want to own long-term government bonds due to the fear of inflation and financial repression?
Then don’t.
Don’t want to have 40% of your offshore investment funds in 7 stocks on heady valuations.
Then don’t.
Want to own a sizeable portion of Gold to protect your portfolio against a monetary reset?
Then do it.
Interestingly, based on research at a large scale, these benefits have even led to sustained periods where there has been outperformance relative to the APRA-regulated peers.
According to new research from the University of Adelaide’s International Centre for Financial Services, Self Managed Superfunds outperformed APRA Regulated funds. The research was conducted over 5 years ending 30 June 2023, with SMSFs earning 6.5% per-annum against the APRA funds earning 5.3%.
This study was said to be the largest study of its kind, capturing the financial performance of almost 7 out of every 10 SMSFs in Australia according to Dr Mikhaylov as reported by Keeli Cambourne from SMSF Adviser.
Interestingly the research found that SMSFs that were advised tended to outperform non-advised funds (7.6% versus 6.4% for the 2022-23) financial year.
Article by: Rob Coyte, CEO, Shartru Wealth Management