Understanding the Pros and Cons of Self-Managed Super Funds.

Watering a plant sprouting money
22 August 2023 Read time: 3 min

If you’re on a quest for financial empowerment and long-term security, you’ve probably stumbled upon the term “self-managed super fund” (SMSF). Whether you’re a financial whiz or a beginner in the world of investments, this blog will help you explore the world of SMSFs, and unravel their advantages and potential drawbacks. So, cosy up and let’s dive into the pros and cons of self-managed super funds!

Demystifying Self-Managed Super Funds (SMSFs)


Before we journey into the pros and cons, let’s clarify what an SMSF actually is. In simple terms, an SMSF is a retirement fund managed by you and a small group of trustees, who are also family members. This setup offers greater control over your investments compared to traditional super funds, where professionals make the decisions for you.


Pros of SMSFs: Taking the Reins of Your Financial Destiny


Control and Flexibility

One of the most alluring aspects of an SMSF is the autonomy it grants you. You’re the captain of your financial ship, steering it according to your documented investment goals and risk tolerance. This flexibility means you can align your investments with your values, which is particularly attractive to socially conscious investors.


Diversification Opportunities

With an SMSF (and once you’ve done all the right paperwork!), you have the power to diversify your investments across a wide range of assets, such as stocks, real estate, bonds, and more. And as we know, diversification can help you smooth your returns and manage short term volatility.


Tax Efficiency

Unlike other types of investments, superannuation funds can offer some unique tax benefits. SMSFs put you in control of these benefits,  which include the potential to lower tax rates on capital gains and on income earned during retirement. Additionally, you have the ability to strategically manage your investments to optimise your tax situation.


Estate Planning

By having an SMSF, you can create a tailored estate plan that aligns with your wishes, ensuring your loved ones are well taken care of after you’re gone.


Cons of SMSFs: Navigating the Challenges


Time and Expertise

While the autonomy is appealing, managing your own super fund demands a considerable amount of time and financial know-how. You’ll need to keep up with market trends, legislative changes, and various investment strategies to make informed decisions. 



Running an SMSF comes with costs. There are setup fees, administrative expenses, and professional fees (such as for auditors and accountants). If your SMSF portfolio is relatively small, these costs could really add up and eat into your returns.


Responsibility and Accountability

As a trustee, you have legal responsibilities to manage the fund for the sole purpose of retirement benefits for your members. Failure to do so could result in penalties or loss of your fund’s tax concessions.


Risk and Volatility

With great control comes great responsibility. While diversification can help to mitigate risk, it doesn’t eliminate it entirely. Market fluctuations and economic downturns can impact the value of your investments, potentially affecting your retirement savings. And if you’re not a professional investor, market volatility can be very hard to understand and manage well.


Wrapping Up: The pros and cons of Self-Managed Super Funds


As you weigh the pros and cons of self-managed super funds, remember that this choice is deeply personal and should align with your financial goals, risk tolerance, and level of financial acumen and commitment. 


If you’re passionate about financial management, have the time to dedicate, and seek greater control over your retirement destiny, an SMSF might just be a good move.


Over the years, however, we’ve seen a greater emphasis on compliance and more stringent regulatory requirements for SMSFs. And, for many, these changes mean that self-managed super funds have become mythically hard to manage. So, if the complexities and responsibilities seem overwhelming, you might stick to your standard super fund or speak to our team about our SMSF Management Service (and no… the irony isn’t lost on us). 


So, whether you decide to embark on an SMSF journey or opt for more traditional avenues, always remember to speak to a finance professional before making a decision. Their expertise can guide you through the intricacies and help you make informed choices.


Whatever path you choose, don’t hesitate to reach out to your advice team. We’re here and ready when you are.


Speak to the team.