I guess what I was trying to get at, is if you want to go with cash and index funds, then is it that hard to do a SMSF? while these options are available in superfunds, you may be able to do it youself just as easily and possibly with lower fees (ie Ubank and vanguard)…

I understand that there are SMSF support structures out there that can audit etc a SMSF for around $700 per year… So depending on your funds, that doesn’t necessarily equate to significant costs (ie to warrant someone needing a $1,000,000 before setting up a SMSF).

I agree with you, re superfunds offering a fast variety of products and can manage for very low fees and probably mean that a SMSF isn’t necessary. But I think that SMSF isn’t necessarily that hard or expensive…. It is an interesting and complicated debate and I guess depends on what people want to achieve.

Your comments makes me suspect that you, like most people, are unclear about the structure of superannuation.
A SMSF is a style of bucket. The contents of the bucket determine the performance, not the style of bucket.
You can invest in index funds within SMSFs and other off-the-shelf funds (retail and corporate). There are loads of very low cost retail superannuation accounts that enable you to choose to invest your balance in index funds. In fact that is what I most often suggest to clients who are just starting out in improving their financial competence and confidence.

From APRA:

“In the ten years to 30 June 2010, the average ROR for large funds was 3.3 per cent per annum. Public sector funds recorded an ROR of 4.2 per cent per annum, corporate funds 3.9 per cent per annum, industry funds 3.9 per cent per annum and retail funds recorded 2.5 per cent per annum.”

At a recent conference Chant listed three reasons for starting a SMSF and interestingly suggests you needn’t start one with less than $1 million balance.

http://www.moneymanagement.com.au/news/minimum-to-start-smsfs-should-be-1-million-chant

On the topic of investment choice, we offer over 250 managed funds across numerous asset classes as well as ASX-listed securities (including ETF options) through our Direct Share Choice option.

On the topic of fees, our product has a capped admin fee for balances over $500,000. And if you were to combine this with our fee aggregation facility (i.e. linking family accounts), you will not collectively pay more than this maximum fee. The maximum admin fee on our product is $3,500 p.a. for clients wanting access to managed funds and direct shares.

Admittedly we do not offer access to illiquid assets such as unlisted or business real property, but for the majority of investors, access to direct shares and managed funds is sufficient to more than achieve their retirement goals (with the right advice). So I tend to agree with Matt on his article based on what is appropriate for the MAJORITY of investors.

I guess my main point is that retail super funds are not out to bleed their members dry and we offer a great deal of investment choice and online flexibility.

As a final thought, if you MUST have a SMSF but it is not desireable or possible for you to be the trustee of your own fund, it may be worth considering a small APRA fund (SAF). Typically it has all the makings of an SMSF (including the ability to add business real property to your portfolio) but the trustee responsibility is borne by a professional corporate trustee. SAFs may be suitable for investors who feel that they do not fully understand the responsibilities of being a trustee or cannot be a trustee due to bankruptcy or non-residency for example.

Thanks for your article Matt. There is a lot of hype about the virtues of SMSFs and it is good to stimulate some debate.

There’s also the dangers of uneducated members determining their own asset allocation and selecting investments. If you need to ring up in the middle of the night to check the balance or adjust your investments then perhaps you are worrying too much.

On the other hand direct property can be a great reason for SMSFs.

Too often I’ve seen SMSF’s offered as a solution only to increase the Accountants income.