The pros and cons of taking the DIY super route

"Self Managed" was the key motivation to leave UniSuper in 2021 as I could no longer agree with their wisdom.
Communications heralded low rate environment, inflation signs were "transitory" and the renewables revolution.
Shook my head at their forecasts. Called accountant & set up SMSF. Constructed for inflation & diversified well.
Beaten all the Industry Super returns past 3 years. And in 2023/24: 20.5%

I have managed our SMSF quite successfully for 21 years with some training but no background that may be seen as relevant. We choose to invest predominantly in Australian listed companies that have overseas exposure. Sure, we have made some mistakes but at least we own them and we're not paying professionals to make similar mistakes. There's a saying that's gone around: 'it's the fund managers that own the yachts, not the investors.' The reality is, if you have the right personality, are half smart and are prepared to apply yourself, investing successfully is not a dark art. Contrary to what the pros repeatedly like to tell us. Along the way we have also invested in a range of international and domestic managed funds. The outcomes have been disappointing across the board. In every case! Fund managers make brave claims as to performance but invariably fail to provide their stellar (or even modest) returns with any consistency. Regulations do not encourage fund managers to strive for out performance and so all funds revert to the mean over time. Reason one for going down the SMSF route. Another that no one has mentioned as yet is the considerable satisfaction derived from managing our super and by default, our future. Great for our sense of self and great for the brain too. Time Cost? I confess to enjoying much of the journey and so I invest more time, clearly, than someone paying others to do the work. But when you're investing in your future and you derive satisfaction from the effort, the time cost is not an impost. And our accountant's fees also represent value when I compare the costs professional managers charge and then of course, fairly regularly fail to perform. With luck, one day I'll be too old, or it may become too much work, but we have a Plan B.

What does SMSF capitals stand for?? Self Managed Superannuation Fund. That means you ...yes you.. manage it, No! you do not let someone else to manage it. Need advice? Pay someone but better yet join the (NTAA) National Tax Accountants association as trustee of your super fund and attend seminars on super and tax law. Why? Not to be a bush accountant or fly by your pants solicitor but for when you go and get advice you can sort the wheat from the chaf.
I lost count how many times when I approached so called advisers they were enraged that I did not want them to manage my investments but rather they were angered I just wanted to pay for genuine advice. The best advice came from lawyers and accountants I exchanged views with over lunch at the NTAA seminars.

We closed off our fund when I was 65, why? because I realised it was getting too complex the rules keep changing and I could also see the industry funds and their mates the labor party were out to screw SMSF's. Example? Taxing unrealised capital gains.

Occassionaly I go down memory lane and review some of my investment notes and long term plans we had drawn up. I am amazed that was us but father time eventually catches up with you. We put it into a small business that we control and our adult siblings watch over us and guide us.

Unfortunately Pareto's law (The 80/20 rule) also also applies to SMSF's. If you do not drive it you do not control it.

I have a few questions, those in the know, I would appreciate your comments, without liability nor prejudice.
I have this smsf and I am the trustee, i am the only member of smsf and I have retired, age 63. It has say 1.5m and I will convert it to pension phase soon. So the capital to support this income stream is 1.5m. I have trawled the ATO pages and it says one cannot increase this capital supporting the income stream later via contribution nor rollover ( from another super fund ) So this pension / income stream is stuck with 1.5m ( even though the transfer balance cap is $1.9. this FY 2025.
I also have a super with an industry fund, in accumulation phase, I want this to be in accumulation phase so that shd i work part time later on, i have a super fund to contribute to. Say when i am truly not interested to work anymore, say this super has 100K, do i start another brand new pension phase with this 100K ( as I cant rollover this 100K to my smsf ) ? This leads me to having 2 income stream. Is that possible ?
Thanking in advance those who comment.

Yes you do, and yes it is possible.

Who knows, by the time you get there, perhaps the rules on contributing to pension-status accounts may have changed? What you will do, when you make the plunge to retirement mode, is crystalise your personal transfer balance cap amount. So if it's $1.9m when you do it (as it is currently) then it's $1.9m for you permanently - so you can only ever put another $400K into it, irrespective of what happens to the transfer balance cap maximum limit in the future. Now what happens to the balance afterwards doesn't matter, but the cap to transfer in will be set for you. There are other wrinkles as well. The ATO has a bunch of info on this.

Something to think about.

The sad fact is that these days most people don't need an SMSF to do what they want to do.
Unless you have complex estate planning needs, or you want to buy and investment property (with or without lending) there are any number of platforms out there that will let you do what you want and more than likely the fees will be cheaper. You don't always need an adviser if you want to DIY (some platforms may require, or you may get slightly lower fees or more tailored investments if you use an adviser) but advice is not compulsory. More importantly you also don't have all the risks and compliance obligations that come with being a trustee.
I think SMSF's are a great vehicle for some, it's just that many people get sucked in by hearsay conversations with friends or acquaintances or worse, facebook, where the pitch is you can make big bucks with an SMSF that you can't elsewhere. The reality is mostly you can do the same good or bad investments elsewhere with the difference being that there is an independent trustee who generally has some guardrails to protect you.

The fees i pay to the accountant are way less than the cut "North" demanded on my balance for the privilege of offering me a limited choice of investments through their portal. Add to that a failure to offer any advice whatsoever, leaving it to a FP who wanted another 1% plus and you eventually realize the system is not working in your favour. Simple Index funds with low costs purchased through a low cost admin system ($79 a month is peanuts) are the path to wealth. (Thanks John Bogle). Also simple enough to follow well into your 80's. Keep it simple and out of the hands of the "professionals"

Due to the extra work involved in running an SMSF I believe it is essential that people benchmark their SMSF return against a quality APRA fund. In order to do this properly you must first establish your risk profile so that the comparison is with the appropriate option. After all, if you are not consistently outperforming then what’s the point?

In my view the single most useful feature of an SMSF over APRA funds is that it allows trustees to fine tune their risk/return profile on the fly particularly when invested in highly liquid assets such as shares. There comes a point when preservation of capital becomes more important than outright returns. I am always reminded of a neighbor who complained that he "lost half his super" in the aftermath of the GFC just as he was approaching retirement (unfortunately he never regained the lost super and succumbed to cancer a short time after retiring). Assuming a healthy balance trustees have the option to switch to cash and other low risk investments as they approach retirement thus avoiding the risk of losing significant savings in their final years.

People losing a portion of investments close to retirement age is common. It's common because financial markets are orchestrated to turn negative. Western governments and the economy don't want lots of people retiring. Orchestrated financial calamities means delaying or even stopping retirement plans. Keeps us working for the greater good. Economy needs its worker ants.

Whilst an SMSF does provide you with that control opportunity, if you're investing in standard investments - shares, managed funds etc. - then any of the DYI super fund options offer you exactly the same opportunity for way less money and admin.

Well said Michael F. Benchmarking investment performance (after all fees) against an APRA regulated fund with a similar investment asset allocation is something that many (most?) SMSF trustees are loathe to do. This is because it requires effort and will likely explode the myth that managing their own retirement savings brings about better investment outcomes. The basic truth is that for most people, an SMSF is an expensive hobby and they would be far better off in a APRA regulated fund with the investing being done by professionals. But that would spoil the story wouldn't it?

Wow David Wilson there are a lot of unsubstantiated claims in your comment, none of which have been my experience with an SMSF for over 20 years. Our SMSF has clearly beaten the Australian Super High Growth performance (an easy number to find so not much "effort" actually) over any period longer than 3 years.

An option worth considering is an APRA regulated Super Fund that permits a degree of flexibilty and control for the member that exceed the more popular options that are mentioned most commonly in the media. Personally I like the idea of allocating my investments consistent with my investment strategy and rebalancing on my schedule. Also the option to choose Term Deposits, invest in AUS shares and ETF's (including Fixed Income) directly and avoiding the hassle of audits and administration of a SMSF is worth considering. Yes, there are no options for investing in unlisted commercial property or artworks etc. and selecting a low fee fund is critical - but it is an option that may suit individuals wanting more control over their investments.

An important issue is the capacity of the person administering the investments as they age(I write as an 86 year old) An AARP study in USA found that an early sign of dementia is inappropriate decision making (particularly financial) Should a mental acuity test for decision making be introduced for trustees of SMSF?

Thank you Richard,
This is the "elephant in the room" for me. It is easy to see why people fall in love with SMSFs during accumulation phase (tax concessions, the aspect of control, etc). And , of course, financial advisers love to promote these attributes. As we age, it is just as easy to see how the initial lust starts to wane.
On a separate issue, I would have thought that most people understand that superannuation is a wasting asset in retirement. The tax concessions tend to hide that reality. Leaving tax aside, why hold illiquid assets in a vehicle that in pension phase imposes mandatory withdrawals that over time will exceed the income return generated from the asset? When that inflection point arrives, it may not be the most opportune time to sell. Good luck!