Is there growing SMSF disillusionment?
23 April 2015
Not everyone does well from an SMSF. The lure of having control over your own money is great, but that does not necessarily make for a happy experience. One of the biggest problems is that it only makes sense with a certain level of funds under management. A minimum amount is widely thought to be $300,000. Anything less and the fees are too high to justify the move. It would be better to go to a low cost alternative.
The accountants who often persuade their clients to go into SMSFs often neglect to mention this -- a severe conflict of interest because many get at least 40% of their income from servicing SMSFs.
The AFR is reporting that many are choosing to wind down their SMSFs:
"Australian Super, the nation's biggest industry fund with more than two million investors and assets of $85 billion, claims there has been a 33 per cent year-on-year increase in the number of investors leaving self-managed super for managed options.
Sunsuper, which has more than 1 million investors and $31 billion under management, says there has been a more than 45 per cent increase in funds under management returning from self-managed funds.
AustralianSuper group executive membership Paul Schroder said: "The idea that SMSFs are some sort of unstoppable investment juggernaut has stopped. In the face of changing circumstances people are being more discerning."
But Peter Burgess, head of policy, technical and educational services for AMP, the financial services giant with more than $19 billion of SMSF funds under administration, said there had not been an increase in wind-ups amongst its clients.
"We think we have the right people setting them up," Mr Burgess said. "Growth is sustainable and controlled," he added. AMP has about $215 billion under management.
AMP's member accounts last year increased by more than 600 to 15,400."
There are more than 520,000 self-managed super funds, more than a million members, and assets totalling more than $550 billion, or about a third of the nation's super savings. About 7000 SMSFs are set up every quarter.
If there is some disillusionment, it is only a recent trend. In the five years to 2014, which covers most of the global financial crisis, the number of annual wind-ups fell from more than 15,000 to just over 2000.
In the five years from the global financial crisis to 2013, the number of funds grew by nearly 30 per cent and are currently annually increasing by 7 per cent.