Now what must be stressed first and foremost before we go any further is that superannuation is not an investment – it is a legal structure for holding investments on behalf of the investor until the investor has reached retirement.

Therefore comments about how good an “investment” superannuation is actually reflect a lack of understanding by the commentator on the topic. The same investments that appear in a superannuation fund (whether it be retail, industry, wholesale or self managed) can basically be owned by an individual – shares, property cash and fixed interest investments.

What I see happen is that a person gets “advised” that a Self Managed Superannuation Fund is the best way to hold their assets for retirement. Now this might be the case and in all reality you should have a long discussion with your Financial Planner about the appropriateness of such a legal structure. You also need to look at the costs involved and whether you have the skills, interest and desire to manage the investment process along with all the other things you do with your life.

While there are many stories of people who have managed their SMSFs quite successfully and have actually been able to grow their funds better than if they were invested in another option, I put to you that there are far more who have gone nowhere and in fact have destroyed any chance of a comfortable retirement by taking on a job they cannot really do.

Let me share with you 4 stories about actual people who owned Self Managed Super Funds and could not understand why they did not make much money (please note that these people are not clients, but people who have passed through our practice over the past couple of years):

Case 1: Client was short of cash, had recently lost a court case so he took $50,000 out of his fund to pay his legal fees – there are so many breaches there that I shudder to think to how this fund could pass an audit.

Case 2: Client gets told by a mate that he should look after his own superannuation, as he will get better returns. End result client rolls over his $25,000 into an SMSF at a cost $1,500 to set up the fund, does nothing for 2 years and wonders why his superannuation goes nowhere. At the age of 50, this person has problems.

Case 3: Client sets up a Self Managed with $300,000. Puts the cash into a cheque account for 3 years. When I asked why, the client said he did not know where he should invest the money and could not be bothered learning about the stock market. Hello, don’t the words self managed mean anything to you?

Case 4: Another client set up a fund with about $80,000 and the proceeds to put all the funds into a wrap account. The wrap account has fees of about 1.6% of the balance and the client pays accounting fees of about $1,500 per annum. Why bother?

So before you get involved in the hype you really should talk to a Financial Planner who works in this area as I have not even touched on any of the other issues and obligations that you take on as a trustee. SMSFs – good for some, but maybe not for all.

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Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.