#015 - Busting The Most Common SMSF Myths 💸🧐

In this episode of SMSF Insider, host Troy dives into the most common myths surrounding self-managed super funds (SMSFs). He clarifies the misconceptions that SMSFs are automatically more expensive than other superannuation funds, emphasizing that while they may be pricier for lower balances, they can be more cost-effective as balances grow. Troy also addresses the time commitment involved in managing an SMSF, pointing out that it can consume a lot of time if done independently. However, he reassures listeners that with the right support, achieving financial independence through an SMSF is entirely feasible. Tune in for valuable insights and advice on navigating the complexities of SMSFs. Remember, this podcast is not personal financial advice—always consult with a licensed advisor before making investment decisions.

Ready to finally take control of your take control of your retirement savings and stop leaving your future in someone else’s hands? Book your free call with our team today to find out more: https://www.bcsmsf.com.au/contact-us/

Follow us:

Instagram – https://www.instagram.com/bluechipsmsf/

Website – https://www.bcsmsf.com.au

Please note: The information provided in this recording is for coaching and educational purposes only. It should not be considered personal financial advice. Everyone’s situation is different, so before acting on any of the content discussed, please seek independent financial advice tailored to your specific circumstances.

Timestamps: 

00:00:00 - 00:00:00: Introduction

00:01:14 - Myth 1: SMSFs Are Automatically More Expensive

00:02:32 - Myth 2: Setting Up an SMSF Is Too Complicated

00:03:47 - Myth 3: You Need to Be a Financial Expert

00:04:51 - Myth 4: SMSFs Are Too Risky

00:05:45 - Myth 5: SMSFs Have Too Many Hidden Fees

00:06:48 - Myth 6: You Can't Borrow to Invest with an SMSF

00:07:32 - Myth 7: Once Set Up, an SMSF Requires No Attention

00:08:44 - Myth 8: You Can't Invest in Property with an SMSF

00:09:15 - Myth 9: Mistakes Will Cost You Your Entire Retirement Savings

00:09:47 - Myth 10: SMSFs Don't Perform as Well as Other Funds

00:10:30 - Myth 11: Running an SMSF Takes Up All Your Free Time

00:11:12 - Myth 12: You Can Only Have One Type of Investment

00:11:33 - Myth 13: Using an Advisor Means Losing Control

00:12:05 - Myth 14: SMSFs Are Only for the Wealthy

Episode Transcript

(00:00):
You can't invest in property with an SMSF. You most certainly can invest
in property with an SMSF. You can invest in residential, commercial, industrial
with an SMSF and you can borrow. And it is probably one
of the most popular strategies that clients use to gain
wealth through super. So a lot of clients will set up an SMSF just
to purchase property. Certainly with lower balances, an SMSF could

(00:21):
be more expensive than other funds. But as
your balance grows, an SMSF could actually be much
cheaper than an existing fund, certainly with
a higher balance. Running an SMSF takes up all of your free time.
Well, yes, if you try and do it yourself, then the SMSF
will take up a lot of your time. That's why welcome to SMSF

(00:41):
Insider, where we help busy professionals to gain financial
independence using an SMSF. Hi, I'm Troy, founder of
Blue Chip SMSF Services. Now, over the last 20 years, I've helped thousands
of Aussies manage the complexities of self-managed super funds. And
in this podcast, I'll answer your questions, break down the myths, so
you can take charge of your financial freedom. Let's get into it. Hey guys,

(01:02):
just a quick disclaimer and just a reminder that this is not personal
advice, so make sure you speak with a licensed advisor before making
any investment decision. Hey guys, welcome to this edition of
SMSF Insider, where we'll be busting the most common myths
about having an SMSF. Myth number one is
SMSFs are automatically more expensive than

(01:24):
other funds. Certainly with lower balances,
an SMSF could be more expensive than other
funds. But as your balance grows, an SMSF could
actually be much cheaper and much more cost effective
than an existing fund, certainly with
a higher balance. And the reason for that is most If

(01:45):
not all, super funds outside of SMSFs like industry funds
and retail funds are all percentage based. So the more you have
in super, the more you'll pay in fees. So as your
balance grows within super, an
SMSF will become more cost effective or should become
more cost effective because it is typically a flat fee

(02:05):
structure. So, it doesn't
matter whether you've got $200,000 or $2 million in
super or $3 million in super, your
fees should technically be a
flat fee model as opposed to a percentage-based
fee structure that you'll see with an industry fund or a retail

(02:28):
fund. Myth number one is busted,
that SMSFs are not automatically more expensive than
industry and retail funds. The reason I say 200,000 is the ATO does
have a guideline of 200,000 for an SMSF. And
that is because after some research, they have decided

(02:48):
that it does become a little bit more cost effective.
Well, that's where the crossover point should be between an
industrial retail fund and an SMSF is around 200,000. And
that is the guideline that has been set out by the ATO. Now
that doesn't mean that because you have 200,000 you should automatically
go and set up an SMSF, it just means that it does become

(03:10):
a bit more viable once you have over 200,000 within
Super. And that can be between one member,
two members, all the way up to six members. So you can have up to six members
in an SMSF. But as long as collectively, between
all of those members, the fund balance

(03:30):
adds up to $200,000 or more, then certainly an
SMSF should become more cost
effective. So myth number one, busted. Myth
number two, setting up an SMSF is too complicated.
Well, yes, it can be very complicated if
you try and do it yourself. But if you engage a specialist, you

(03:51):
should have a good experience and it should be very much a
smooth process. But certainly, we have had, there's
been many a case where clients have tried to do it themselves and it
has been very complicated. Myth number two,
bust it as well. You can set up, it can be complicated, engage
a professional or engage a specialist in this space and you

(04:13):
won't have, it won't be a complicated process. Myth
number three is you need to be a financial expert to
manage an SMSF. Well, if you engage somebody
else to help you, if you're getting financial advice or you've got an SMSF specialist
to help you, then managing an SMSF, you don't
need to be a financial expert to manage your SMSF.

(04:35):
So no, you don't need to be a financial expert, but by
listening to podcasts like this one or gaining
some insight knowledge and getting some education around an SMSF, you
don't need to be a financial expert. You just need to do
the basics, understand the ins and outs, and have someone hold
your hand through the process. So myth number three also

(04:57):
busted. Myth number four, SMSFs are
too risky. Well, they are if you put it all
into one single asset class like Dogecoin
or any other single asset class. So
it all depends where you're investing your money. If you have
diversification and you're getting some guidelines or some

(05:20):
guidance around your diversification, certainly you
can de-risk your portfolio. So, myth number
four, busted also. SMSFs are
too risky. They can be, but mostly, for
the most part, if you're getting some diversification, you're getting some advice around diversification,
then certainly your SMSF shouldn't

(05:42):
be too risky. Myth number five, SMSFs have
too many hidden fees. Well, they shouldn't have too many fees. With
an SMSF, you should have maximum one or maybe two
fees, one for your independent audit and one for the accounting.
At Bluechip SMSF Services, we have one fee and
that includes everything, your audit, your independent audit

(06:04):
and your accounting. So, any fees outside of
that, certainly there shouldn't be
any fees apart from those are the two main ones. Anything
outside of that, there shouldn't be any other hidden fees or
any other fees attached to your RS-MSEP. So,
myth number five, busted. And if you do have any

(06:25):
other fees in there, certainly you should be making notes
of those and questioning who's charging those
fees and get in touch with whoever's charging them.
But certainly, myth number five should be busted. There shouldn't
be any hidden fees apart from one, maximum two. Just
quickly guys, if you're a busy professional fed up with traditional super

(06:47):
funds and overwhelmed by the setup of your SMSF, we can help.
Book in a call with my team using the link in the show notes and let's
build your future on your terms. Now, back to the episode.
Myth number six. You can't borrow to invest with
an SMSF. Well, yes, you can. You can borrow using
what's called a limited recourse borrowing arrangement. And

(07:08):
that is typically for people or trustees
and members that want to invest in property. They can have
a loan or limited recourse borrowing arrangement within their SMSF and
purchase assets like property. So myth number six,
busted. Yes, you most definitely can borrow
with your SMSF. Myth number seven, once

(07:30):
an SMSF is set up, you don't need to do anything. Well, you
kind of do. You need to work with your SMSF administrator
to provide them all the information they need to conduct the annual tax
return and the audit. So you can't just fall asleep and wake
up in 12 months time and hopefully hope that everything's gone smoothly. You
do need to be engaged with your SMSF administrator and

(07:52):
provide them the information they need. to get the
job done and help them help you. With myth
number seven, you certainly do need
to, you can't just do nothing. You
don't need to do any, you do need to do more than nothing. With
an industry fund though, certainly you can fall asleep at the wheel.

(08:13):
With an industry fund, wake up in seven years time and everything
will be as it was when before you went to
sleep because an industry fund is managed by is
it's a pool of money that is managed by
professionals so you certainly don't need to
do anything with an industry fund but with an SMSF you

(08:34):
do need to be a bit more hands-on and you do need to provide information
to your SMSF administrator to make sure your fund
remains compliant. So myth number seven, bust it. Myth
number eight, you can't invest in property with an SMSF. You most
certainly can invest in property with an SMSF. You can invest in residential, commercial,
industrial with an SMSF. And you can, as I mentioned

(08:57):
earlier, borrow. And it is probably one of the most popular
strategies that clients use to gain wealth through super.
So a lot of clients will set up an SMSF just to purchase property.
And that could be residential, commercial, or industrial property. So
myth number eight, bust it. Myth number nine, if you make a mistake, it
will cost you your entire retirement savings. Yes,

(09:18):
it will if you invest in some sort of scam or
you're provided advice or you're investing in
an investment that's offering unrealistic returns.
You most certainly can lose it all. But if
you're investing in accordance with or you're getting some guidance
from an industry professional or an advisor, then

(09:40):
this shouldn't ever happen. So myth number
nine should be busted. Myth number 10, SMSFs don't perform
as well as industry or retail super funds. Well, it depends
where you're invested. If you're invested in cash with an SMSF and
your industry fund or retail fund is invested in high growth assets like
Australian shares or international shares, then of course, industry fund and

(10:02):
a retail fund will outperform. But vice versa, if your SMSF is
invested in high growth assets like Australian shares, international
shares, and crypto and some other growth assets, and
the industry fund and retail fund funds are invested in
conservative portfolios, then the SMSF will
outperform. So it really depends on where the underlying investments, on

(10:23):
where your investments are, where your money is invested.
Myth number 11, running an SMSF takes up all of your free time.
Well, yes, if you try and do it yourself, then the SMSF
will take up a lot of your time. That's why you should
engage a professional to run your SMSF for
you. That way, it's not going to take up

(10:45):
any of your time and you'll be able to concentrate on
the things, enjoy time with your family and do the things you enjoy doing.
So yes, If you do it yourself, it will take
up a lot of your time. Engage a professional and it won't. So myth
number 11, busted. Myth number 12, you can only have one
type of investment inside your SMSF. Definitely not

(11:06):
the case. With an SMSF, you can
invest in a wide range of assets. and have diversification
inside your portfolio. Anything from cash, fixed interest, property,
direct shares, international shares, Australian shares, crypto,
bullion, you can have a very wide range of exposure

(11:26):
into all asset classes. So myth number 12, busted.
Myth 13, if you use an advisor or accountant, you lose control of
your SMSF. Certainly not the case. Your advisor or
your accountant should just be adding to the overall experience of your SMSF
and adding value to having an SMSF. You
shouldn't really be losing control. At the end of the day, it is a self-managed super

(11:49):
fund, so you do have control over
your investments and how you want your money invested.
So myth number 13, bust it. Myth number
14, SMSFs are only for the wealthy. Certainly not the case. Although
wealthy clients do have SMSF, most of them, if you have
a certain amount in super, ATO does have some guidelines around

(12:12):
how much you should have to have an SMSF. And
that is purely from a fee perspective. It does become more
cost effective or the crossover point is around certain
thresholds, which the ATO provide guidance
on, but certainly not the case. You don't need to be wealthy to have an
SMSF. Myth number 14, bust it. Guys, that's

(12:33):
a wrap. Thanks for listening and tuning in to SMSF
Insider. If you have some myths that you'd like to know about, please drop them
in the comments below and we'll be sure to come back to you. Thanks for listening. Hey
guys, just a quick disclaimer and just a reminder that this is
not personal advice. So make sure you speak with a licensed advisor before
making any investment decision. Thanks for tuning in to this episode

(12:54):
of SMSF Insider. If you got value from this, make sure you subscribe
so you never miss the strategies we share to help you take control of
your financial future. Find us on socials at Blue Chip SMSF or