Why Self-Managed Superannuation Funds (SMSFs) are Better

This article examines the costs and benefits of large industry super funds compared to Self-Managed Superannuation Funds (SMSFs). It is intended for general informational purposes only and should not be considered financial advice for setting up an SMSF. You should seek guidance from a licensed financial adviser to determine whether an SMSF is the right investment choice for your retirement.

The Australian superannuation industry is a massive sector, managing assets worth over $4 trillion. But, with such scale comes significant expenditure. Australian super funds collectively spent almost $13 billion last financial year. Of this, a large portion was allocated to marketing, sponsorships, and financial advice, including a $500 million splurge on advertising and promotions. Such extravagant spending raises an important question: Is this the most efficient use of your retirement savings?

In this article, we’ll explore the major expenses within Australian super funds, why these costs might be unnecessary, and why opting for a Self-Managed Superannuation Fund (SMSF) can be a more financially savvy choice. With an SMSF, you gain full control of where your money is spent and invested. Here’s why SMSFs offer a better alternative.

Super Fund Expenses: A Closer Look

Advertising and Marketing Expenditure
In the last financial year, Australian Super, the largest fund in Australia with $360 billion in assets, allocated a hefty $53 million to marketing and advertising. The fund’s marketing budget included large sums spent on Facebook campaigns, Google advertising, media agencies, and industry lobby groups. Aware Super spent over $16 million on media agency Atomic Search, and ART (Australian Retirement Trust) spent substantial sums on marketing services. The costs didn’t stop there; the funds also splashed out over $4.5 million on sponsorships for major sports like AFL, rugby, and soccer.

Financial Advice Fees
The total spent by Australian super funds on financial advice reached $1.7 billion, marking a 30% increase from the previous year. While some of this expenditure is directed towards providing members with low-cost or no-cost advice, the increase in advice-related spending, including intrafund advice and payments to external financial advisors, has raised concerns. Colonial First State (CFS) saw its advice expenses triple to $300 million in 2024, largely due to historical advice remediation costs.

Sponsorships and Sports Deals
Funds like Hostplus spent millions sponsoring sports teams, including a $1.8 million deal with the AFL. While funds argue that these sponsorships align with the interests of their members, many question the necessity of such extravagant expenditures, especially when funds could invest that money in more directly impactful areas for members’ retirement outcomes.

Regulatory and Administrative Costs
Alongside marketing and advice, super funds also allocate significant resources to regulatory compliance and administrative costs. These are necessary expenses but often add to the overall cost base of managing a super fund.

Why SMSFs can be a Better Option

Self-Managed Superannuation Funds (SMSFs) are an attractive alternative for those who want greater control over their superannuation savings and avoid the large-scale expenses seen in traditional super funds*. Here are some reasons why SMSFs may be a better option:

No Excessive Marketing and Sponsorship Spending

When you manage your own super, you don’t have to foot the bill for advertising, sponsorships, or other marketing expenses. Large super funds often spend millions trying to increase their membership base and brand awareness. However, these costs ultimately come out of members’ pockets, reducing their retirement savings. With an SMSF, you have the peace of mind that every dollar of your super is directly invested in assets that align with your retirement goals rather than spent on brand-building or sporting sponsorships.

Full Control Over Investment Decisions

One of the most significant advantages of an SMSF is the ability to have full control over how and where your money is invested. Unlike traditional super funds, where your savings are pooled with others, and decisions are made by trustees, an SMSF allows you to choose exactly where your money goes. Whether you prefer shares, direct property investment, or other asset classes, you can manage your portfolio according to your risk tolerance and long-term financial objectives.

This level of control also enables you to avoid unnecessary investments or risky ventures that may not align with your goals. If you want to avoid speculative investments that some super funds might promote, you can take a more conservative or focused approach with your SMSF. The absence of unnecessary intermediary spending such as marketing campaigns and external financial advisors means more of your money is invested directly into assets that matter to you.

Reduced Fees and Costs

SMSFs can be more cost-effective, particularly for individuals with larger super balances. When you control the fund, you can avoid the management fees, advertising expenses, and other administrative costs that super funds typically charge to cover their large-scale operations. The cost of running an SMSF includes administration, accounting, auditing, and compliance, but for those with larger balances, these costs are often proportionately lower than the fees levied by retail and industry super funds.

Large super funds charge significant fees for investment management and the administrative overhead associated with managing thousands or millions of members. While fees are necessary for any superannuation fund, they can be excessive when they cover unnecessary services or inflated operational costs. In contrast, an SMSF allows you to avoid these overhead costs by directly managing your super fund’s investments. Many SMSF owners work with an SMSF accountant to ensure that their accounting and tax obligations are efficiently handled, reducing unnecessary costs and ensuring compliance with regulatory requirements.

Increased Transparency and Control Over Expenses

With an SMSF, you have transparency over every dollar spent. You can control not only where your money is invested but also where any operational costs are directed. In large super funds, much of the spending on marketing, sponsorships, and financial advice is opaque, and as a member, you have little say in how that money is spent. With an SMSF, however, you are directly accountable for all decisions, ensuring that every expense is necessary, and in your best interests.

To ensure your SMSF remains compliant and optimized, many individuals rely on SMSF accounting services to handle the tax reporting, audits, and financial statements. Working with an experienced SMSF accountant helps you stay on top of your financial obligations without spending unnecessarily.

Tailored Investment Strategies

Super funds often have a one-size-fits-all approach when it comes to investment strategies. They may be forced to invest in a way that aligns with the interests of the fund’s large member base, which might not always suit your personal needs. On the other hand, an SMSF allows you to create a tailored investment strategy that works specifically for you.

Whether you want to focus on ethical investments, sustainable practices, or high-growth opportunities, you can adjust your strategy in real-time without being hindered by the fund’s broader objectives. Additionally, you can choose to invest in alternative assets, such as property or collectibles, which may not be available through other super funds.

Estate Planning and Asset Protection

SMSFs offer greater flexibility in terms of estate planning. You can structure your fund to ensure that assets pass to your beneficiaries in a tax-efficient and controlled manner. This kind of control can be especially important if you have specific wishes for how your superannuation assets should be distributed.

Conclusion: SMSFs – The Smarter Choice for Control and Efficiency

The increasing expenditure on advertising, marketing, sponsorships, and financial advice in the Australian superannuation industry highlights the inefficiencies that many members unknowingly fund. While traditional super funds argue that such spending drives growth and better outcomes, the reality is that a significant portion of your retirement savings may be spent on unnecessary initiatives rather than directly enhancing your financial future.

By opting for a Self-Managed Superannuation Fund, you can cut out the middleman, avoid excessive fees, and have complete control over where your money is spent and invested. With an SMSF, every dollar is spent in your best interest, with the potential for greater returns and a more personalised investment strategy. If you’re looking for an efficient, transparent, and flexible way to manage your super, an SMSF might be the smarter choice.

And when it comes to ensuring that your SMSF is set up and maintained correctly, working with an SMSF accountant and utilising SMSF accounting services can help you navigate the complexities of the system, stay compliant with regulations, and optimise your superannuation strategy for the best financial outcomes.

We highly recommend to consult with a financial adviser when deciding if Self Manage Superfund is better choice for you.