What are the responsibilities and risks of running a self-managed super fund (SMSF)? 

One of the key differences between a self-managed super fund (SMSF) and other superannuation arrangements is that SMSF trustees are responsible for selecting and managing the fund's investments. This can include a broader range of asset types, such as direct property.

But setting up an SMSF doesn't just change how your super is invested. It also changes your relationship with it. Instead of relying on a super fund to manage many of the day-to-day responsibilities, you as the trustee take on a more active role in overseeing the fund. For some people, that's part of the appeal. For others, it's a commitment they hadn't fully considered.

Before setting up an SMSF, it's worth understanding what that role involves and whether it's one you want to take on.

What does being an SMSF trustee actually mean?

One of the biggest differences between an SMSF and a traditional super fund is who manages the fund. With a retail or industry super fund, professional teams oversee things like investments, administration, reporting, compliance and making sure the fund follows the rules. With an SMSF, those responsibilities sit with the trustees (the people responsible for managing the SMSF).

That doesn't mean trustees need to complete every task themselves. Many people choose to work with accountants, financial advisers, administrators and other professionals. But as a trustee, you're ultimately accountable for making sure the fund is compliant and is run properly.

What does managing investments look like in an SMSF?

Many super funds offer members a range of investment choices and opportunities to tailor their investment approach. With an SMSF, trustees take direct responsibility for deciding how the fund's assets are invested and take on the role of developing and reviewing an investment strategy. That can include researching opportunities, monitoring performance, and making decisions about the fund's long-term direction.

For people who enjoy investing, this level of involvement can be rewarding. However, it also means trustees own the investment risk. Decisions around how money is invested and performance can have a direct impact on long-term retirement outcomes.

What's involved in running an SMSF day to day?

One aspect of SMSFs that often receives less attention is administration. Trustees need to keep records up to date, store important documents and make sure information is ready when it's needed. Some people enjoy the hands-on element of these activities. Others prefer to engage specialist providers to help take on the workload.

The most important consideration isn't necessarily who completes the task. It's whether you're comfortable taking responsibility for ensuring it gets done.

What compliance responsibilities do trustees have?

Superannuation is governed by rules designed to protect members' retirement savings.

As a trustee of your SMSF, you're responsible for making sure your fund follows the rules. That includes understanding your obligations, maintaining appropriate records, and arranging required reporting and audits.

For some people, this sounds intimidating. In practice, many trustees seek professional guidance to help them understand and look after their accountabilities.

What risks should SMSF trustees understand?

Every major financial decision involves risk, and running an SMSF is no different.

Some of those risks relate to investments. Though members in professionally managed super funds can choose from general investment options, specific investment decisions are made by dedicated teams employed by the fund. With SMSFs, trustees decide how their retirement savings are invested and monitor those decisions over time.

There's also the risk that comes with governance and compliance. Mistakes, poor record-keeping or failing to meet regulatory requirements can create additional complexity and potentially lead to consequences for the fund.

Another important consideration is relying too heavily on one investment. For example, if a large proportion of the fund is invested in a single asset, sector or investment type, the fund may be more vulnerable if that investment doesn't perform as expected.

SMSF trustees should also consider costs, insurance and consumer protections. Moving from an industry or retail fund may affect existing insurance, and SMSFs do not have access to some of the protections available to members of larger, professionally managed super funds. Changes such as illness, death, relationship breakdown or moving overseas can also make an SMSF harder to stay on top of.

How much time does an SMSF take to manage?

One of the most overlooked responsibilities of running an SMSF may simply be the time required. Researching investments, reviewing performance, engaging advisers, keeping records and taking care of ongoing obligations can all require attention throughout the year.

For some people, that's exactly what they want. They enjoy being more hands on in managing their retirement savings and making financial decisions. For others, spending that time elsewhere may feel more valuable.

The key question isn't whether it takes time, but whether it's time you'd value spending on your super.

What happens to your SMSF if your circumstances change?

When people establish an SMSF, they're often thinking about what works for them today.

But an SMSF can remain in place for many years, even decades.

Over that time, careers change, people retire, family circumstances evolve and priorities shift. The level of involvement that feels achievable today may not feel the same in a decade. That doesn't mean an SMSF won't continue to be the right fit. It simply means it's worth considering how your circumstances could change over time and whether you're comfortable maintaining the role of trustee as they do.

Is an SMSF right for you?

Before setting up an SMSF, it can help to think beyond the investment opportunities and consider the role you're taking on.

Ask yourself:

• How involved do I want to be in managing my super?

• Am I comfortable making ongoing decisions about the fund?

• Will I need professional support?

• Am I comfortable taking responsibility for investment decisions and associated risks?

• How diversified is my intended investment approach?

• Do I understand the obligations and consequences that come with being a trustee?

• Could my circumstances change in ways that affect my ability to manage the fund?

• Does the added involvement suit the way I want to manage my financial life?

For some people, the opportunity to take a hands-on role in looking after their retirement savings can be rewarding. Others may prefer knowing that much of the administration, compliance and oversight sits with a professional super fund.