Why Your Self Managed Super Funds Advice Could Be Costing You Thousands

Getting the right guidance for your self managed super fund might seem easy, but the reality is quite different. SMSF trustees dedicate more than eight hours every month to fund management, which adds up to over 100 hours each year. Your fund's professional team can help, but you and your fellow trustees remain fully responsible for all SMSF decisions.

Most people don't realise the true extent of time and money needed to run an SMSF effectively. The fund's setup and maintenance costs can catch many by surprise. These expenses cover investing, accounting, auditing, tax advice, legal services, financial guidance and insurance premiums. The real challenge lies in finding qualified self managed super fund advisors who can provide valuable financial advice worth your investment.

This piece explores how subpar SMSF guidance could drain thousands from your fund. You'll learn about a trustee's non-delegatable responsibilities and ways to identify truly valuable guidance for your super fund. It also reveals budget-friendly strategies to optimise your SMSF advice while maintaining its quality.

The hidden costs of poor SMSF advice

Bad SMSF advice costs way more than just the fees you see upfront. I've watched retirement savings get eaten away by hidden costs that most people never notice.

Unnecessary professional fees

SMSF trustees often depend on service providers who don't know enough about these funds. You end up paying top dollar for advice that's below par. The cost to set up an SMSF ranges substantially, from $530 to $1,500 for simple setup. You'll need to add $870 to $1,600 if you want a corporate trustee structure.

SMSF members often pay sky-high fees without realising it. One case showed clients paying about $10,700 each year for investment advice and compliance work, too much for their fund's size and complexity. ASIC research shows total yearly costs should run between $3,100 and $10,700.

Duplicated services and overlapping roles

Running multiple super funds at once drains money through doubled-up fees. Your retirement savings slowly shrink from repeated admin fees, investment charges, and insurance costs.

Running separate funds for different needs, like having an insurance-only super fund with your SMSF, can mess up your tax deductions if not done right. The math isn't simple and needs careful planning to avoid extra costs.

Missed tax deductions and benefits

Not knowing tax deduction rules properly leads to hidden losses. You'll lose your chance to claim deductions if you don't submit your intent to claim before making withdrawals or rollovers.

Poor advisors often fail to explain the difference between deductible and non-deductible expenses clearly. The fund can deduct costs for statutory charges, financial statements, and audits. But expenses for setting up a trust or creating a new deed don't qualify for deductions.

Note that funds must make fair estimates when expenses can't be split clearly, like with audit fees. They need to figure out how much went toward producing assessable income. Without good advice, people miss many chances to claim these deductions.

Understanding your responsibilities as an SMSF trustee

SMSF trustees often underestimate their significant responsibilities when they take control of their retirement. Professional guidance doesn't change your legally binding and complete duties as a trustee.

Why you can't outsource accountability

You are personally responsible to comply with super and tax laws as an SMSF trustee, whatever help you get to manage your fund. New trustees are often caught off guard by this basic principle. You might hire SMSF professionals to help with fund administration, but you still remain fully accountable. Nobody else takes the blame if things go wrong, from poor investments to missed lodgements.

Legal and financial risks of non-compliance

The Australian Taxation Office (ATO) monitors SMSF compliance closely. Penalties range from administrative fines to criminal sanctions. Individual trustees face personal fines of $500 per penalty unit. Serious breaches can attract up to 60 penalty units ($30,000). You must pay these penalties from your personal savings, not fund assets.

Non-compliance can also lead to:

● Disqualification from acting as a trustee

● Fund assets being frozen

● Your fund losing its tax concessions and becoming non-compliant, which could cost almost half its assets in tax

The role of the trust deed and super laws

Your trust deed acts as your fund's "rule book" and works among other key legislation:

● The Superannuation Industry (Supervision) Act 1993 (SIS Act)

● The Income Tax Assessment Act 1997

● The Corporations Act 2001 (if using a corporate trustee)

The SIS Act plays a vital role. It defines what an SMSF is, how it operates, and introduces the "sole purpose test". This test requires that you manage your fund only to provide retirement benefits to members.

Your trust deed needs regular reviews. Outdated provisions can get pricey with legal complications, especially during member or beneficiary disputes.

Choosing the right self managed super fund advisors

Your choice of qualified professionals to guide your SMSF journey can make all the difference between thriving and just surviving in retirement. More than 25% of superannuation assets are now held in self-managed funds, which makes finding the right advisor crucial.

What a self managed super fund specialist advisor does

A self managed super fund specialist advisor brings advanced expertise in administering, auditing, and advising on SMSFs. These professionals help you manage daily operations, comply with complex regulations, and provide strategic investment guidance based on your risk tolerance and goals. They prepare financial statements, complete annual returns, and represent you when dealing with regulators.

The best advisors have industry-recognised designations like the SMSF Specialist Advisor (SSA®) or Chartered Accountant (CA) SMSF Specialist. However, the SSA® designation alone doesn't authorise anyone to provide financial product advice, practitioners must also have authorisation under an Australian Financial Services (AFS) licence.

How to verify licencing and registration

You should always check if your potential advisor has proper qualifications and registration. ASIC's Financial Advisers Register lists all licenced financial advisers. You can check their AFS licence status through ASIC's Professional Registers Search.

The best advisors belong to professional bodies like the SMSF Association, which requires ongoing professional development. For example, CA SMSF Specialists must complete at least 40% of their CPD requirement in superannuation, including at least 20 hours per triennium specifically in SMSF.

Red flags to watch for in SMSF financial advice

ASIC highlights several warning signs of unsuitable SMSF advice:

● Advisors who push SMSFs for clients with low superannuation balances or limited future contribution potential

● Practitioners who suggest SMSFs without checking your financial knowledge or available time

● Professionals who push for complete delegation of all SMSF responsibilities and decisions

The best choice is an independent advisor who values clear communication and has no ties to specific financial institutions. This approach gives you more investment options without any conflicts of interest.

How to make SMSF advice more cost-effective

Smart choices about professional help can make your SMSF advice more economical. You can substantially cut costs without sacrificing quality through proper planning.

When to use a financial adviser vs accountant

Accountants usually handle SMSF setup, financial systems, and prepare accounts. Licenced financial advisers offer specific investment recommendations, insurance advice, and contribution strategies. Your accountant can manage administrative tasks but cannot provide personalised investment advice without a licence. Start by identifying your actual needs before paying both professionals who might do the same work.

Bundling services to reduce fees

Your accountant, administrator and financial adviser should meet together to avoid service overlap. Monthly administration often proves cheaper than annual processing and gives you current information. Data feeds through electronic systems cut down manual entry costs and provide better audit evidence.

Reviewing your investment strategy regularly

Your investment strategy needs annual reviews at minimum. Your auditor should receive documentation of this process. Market corrections or starting a pension should prompt immediate strategy reviews. These regular checks help your fund stay compliant and match your retirement goals as they change.

Avoiding unnecessary insurance duplication

Trustees might let each member cover their own insurance costs due to premium variations. Make sure you know whether the fund should pay insurance premiums instead of individual members to prevent death benefit complications. The extra costs and complexity of keeping separate super funds for insurance purposes need careful evaluation.

Conclusion

Running your own super fund gives you control and flexibility, but this freedom comes with significant responsibilities. Poor SMSF advice can quietly eat away at your retirement savings through extra fees, doubled-up services, and missed tax advantages.

The ATO will hold you personally accountable whatever professionals help manage your fund. Your legal responsibility stays fixed. You'll need to pay any penalties from your personal savings, not your fund's assets.

Finding qualified advisors becomes crucial to your long-term success. Specialists with recognised designations like SSA® or CA SMSF Specialist are a great way to get guidance. You still need to check their licencing and registration status though. Watch out for anyone who suggests low-balance funds or wants you to hand over all decision-making.

Smart SMSF management needs clear choices about which professionals to work with. Understanding whether you need a financial adviser or an accountant helps prevent overlap in services. You can keep costs down without cutting corners by bundling services, using electronic data feeds, and checking your investment strategy regularly.

Starting and running an SMSF needs careful thought. Professional advice helps, but you need to balance it with your own research and learning. Your retirement security depends on more than just advisor choices, it needs you to be willing to understand and meet your trustee duties. A good look at both the rewards and responsibilities will help your SMSF do what it's meant to do, secure your retirement.