Online platforms have made many financial tasks more accessible allowing people to handle complex financial matters on their own schedules. However, when it comes to setting up a self-managed super fund (SMSF) online, this convenience may end up costing you.

One of the main draws of a self-managed super fund is that it offers more control over where funds are invested in comparison to a retail fund. This allows people to make investment decisions in line with their goals and be fully in control of investment decisions. While this level of control is appealing to many people, it also comes with a significant level of responsibility and risk, particularly when setting up the fund without proper guidance or expertise.

In recent years, many online services have popped up which advertise their ability to set up and manage a SMSF online for free or for a very low cost. This is appealing for those looking to set up a self-managed super fund however, these services have significant risk associated with them.

Legal and Compliance Risks

Setting up a self-managed super fund involves navigating complex regulatory requirements. Superannuation is important and the government has set up regulations which require super funds to adhere to strict standards to ensure funds are used for their intended purpose. Self-managed super funds are not exempt from this. From choosing the right structure for the SMSF to ensuring compliance with tax regulations, laws and ATO reporting obligations, there are so many areas where uninformed people can misstep and cause themselves unnecessary trouble. Online platforms can provide templates and automate processes, but they will not adequately address the intricacies of your individual finances or the regulatory requirements you are obligated to meet. Examples of this are selecting the right Binding Death Benefit Nominations (BDBN) and investment structures which meet SIS requirements.

Investment Complexity

Managing an SMSF requires a thorough understanding of investment strategies. Online platforms offer a range of generic investment options for their users but lack the personalised advice and guidance that a qualified advisor provides. There are regulatory requirements financial professionals must adhere to when giving advice to ensure it is in the best interest of the parties involved. Online platforms are not held to these same requirements. Without the proper oversight, investors may make risky or inappropriate investment decisions that puts their superannuation at risk.

Lack of Support and Expertise

While online platforms may offer user support, usually for platform related-issues, they do not have the expertise or resources to provide guidance on the complexities of superannuation. Setting up an SMSF involves more than just filling out forms and checking some boxes. Careful planning, strategic decision-making, and ongoing management are necessary parts of the SMSF process. This should ideally be done in conjunction with a professional who understands the process and can help you understand aspects you are unsure about. Without access to knowledgeable professionals, people may struggle to navigate the complexities of the SMSF landscape effectively.

Security and Privacy

Entrusting private financial information to an online platform carries inherent security risks. Cybersecurity threats such as data breaches and identity theft are becoming more common, with even some of our largest corporations falling victim to cyber-attacks. Without robust security measures in place, individuals risk exposing their personal and financial information to malicious attacks.

Additionally, the anonymity and convenience of online platforms allows scams to happen far easier. There are several instances of scams being purported as online SMSF platforms where scammers take advantage of unsuspecting people by promoting risky or fraudulent investment schemes disguised as legitimate SMSFs. Without proper due diligence and oversight, investors may fall victim to these scams, resulting in devastating financial losses.

Ultimately, even though online SMSF platforms offer convenience and immediate accessibility, they carry a large amount of risk. The complexities and risks associated with SMSFs require careful consideration and expert guidance to navigate successfully. Before establishing a self-managed super fund, you should seek advice from qualified financial professionals who can provide personalised guidance and support tailored to your individual needs and circumstances. When it comes to your superannuation, it’s always better to be overly cautious than to risk your financial future for the sake of convenience.