The Truth about SMSF’s for Doctors and Dentists
Self Managed Super Funds are very popular among medical professionals, but are they really that great, or should doctors and dentists be considering more traditional superannuation funds?
Let’s look at a few considerations.
THE TIME FACTOR
Medical professionals don’t have a lot of spare time, and most doctors and dentists I meet, certainly don’t want to spend their time managing their own finances or tax affairs.
Managing an SMSF is very time-consuming, even though you can outsource many of the administrative functions to professionals such as myself (accountant) and financial advisers.
Before starting an SMSF you need to consider whether you are willing to dedicate the time to manage your own superannuation benefits.
COSTS
Certainly, in many cases, economies of scale can be achieved with an SMSF, but if you are not careful, running an SMSF can also prove to be a lot more expensive than other super fund options, due to the different layers of fees and costs.
It is critical you keep an eye on costs and always consider whether you really need an SMSF to make certain investments, as many super funds can now replicate SMSF investment options. The one big exception to that is (geared) direct property investment, such as when you buy your own rooms. This is obviously a very popular and powerful strategy among many doctors and dentists.
DIVERSIFICATION
One of the biggest issues with SMSFs is that they typically lack diversification, which increases the risk you are exposed to.
Quite often SMSF investors will concentrate their holdings into one particular asset (a property), or asset class (either Australian shares or cash and term deposits), unlike many other super funds who invest in a mix of (Australian and international) shares, bonds and property. This can have a serious impact on the performance of your fund.
CONCLUSION
I have seen many cases where medical professionals were using an SMSF for no specific reason, and it was costing them money in terms of higher costs, a lack of diversification and/or lower returns.
It is important you seek specific financial advice before starting an SMSF.
Please feel free to contact me on 0423 131 949 or mitchell@affluenceca.com.au to discuss.