SMSF service provider further debunks myths on SMSF costs
In light of the research report into SMSF operating costs which disputed previously reported figures, one service provider says SMSFs may be even more competitive once investment management charges are accounted for.
Last week, a report Rice Warner and the SMSF Association released investigated the costs of operating an SMSF and compared them with retail and industry super funds.
The biggest takeaway from the report was that SMSFs generally become comparable to retail and industry funds at a balance of $200,000 and became a cheaper option when balances reach $500,000.
However, SMSF service provider SuperConcepts, who sponsored the report, stated that, on closer examination, SMSFs may be even more affordable than other APRA options because they largely avoid significant investment management charges.
SuperConcepts noted that the report didn’t include investment management charges and there were some questions for why it did not make allowances for these changes.
In a recent panel discussion for SMSF Week, SuperConcepts executive manager, SMSF technical and strategic solutions, Philip La Greca stated that this only strengthened the case that SMSFs were cheaper where they have a balance beyond $200,000 because investment management charges are seldom an issue.
“The first thing that you’ve got to remember is pretty much every APRA-regulated fund actually has a cost to just hold assets, they all have a custodian, to begin with,” Mr La Greca said.
“Automatically just holding an asset, irrespective of buying or selling, there is an ongoing cost. That is something that most SMSFs don’t bear.”
This means that retail and industry fund fees, in many cases, may be even higher than the figures in the report, depending on the acquisition, disposal and holding costs related to the asset classes funds are invested in and the structures used to hold these assets.
“Very few SMSFs use structured products like managed funds; we know it is only about 20 per cent of the money that is in the SMSF space [that] is in these sorts of products,” Mr La Greca said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.