The amount of money required for people to get excited differs from person to person.
United States investor Warren Buffett apparently became so angry at the prospect of making 12.5 cents a share less profit on a transaction, which would see him make some three to four dollars a share, he decided not to sell at all.
Instead, he continued accumulating even more stock, and eventually became the reluctant owner of a struggling textile firm called Berkshire Hathaway.
Yet, when discussing figures of $330 billion - the size of the SMSF sector - most people are interested.
It is, therefore, surprising there has been relatively little information available on the SMSF industry.
It is true the Australian Taxation Office (ATO) collects information on these superannuation funds, but the data is taken from taxation returns and gives only a snapshot of the industry as at the end of June each year. Besides, by the time the ATO figures come out the information is somewhat musty.
As a result, a number of misconceptions have formed over the years that range from partly correct to complete nonsense. The publication of "A Statistical Summary of Self-Managed Superannuation Funds" as part of the Super System Review, better known as the Cooper review, is, therefore, a welcome eye-opener.
The summary combines information from a number of sources, including the ATO and Australian Prudential Regulation Authority (APRA), but gives a much more detailed overview of the available data. It also incorporates information gathered from a small number of SMSF administrators.
Busting myths
The summary helps build a clearer picture of a fast-growing industry and it has smashed some long-held myths to smithereens.
One of the most widespread myths is probably the allocation to cash in a portfolio.
"We've been talking for a long time that the idea that SMSFs held large amounts in cash was not correct," Self-Managed Super Fund Professionals' Association of Australia (SPAA) chief executive Andrea Slattery says.
"The ATO data is collected on the 30th of June each year. The majority of SMSFs, while they may contribute throughout the year, make the majority of their contributions in June. This leads to that distortion."
The summary shows that on average the allocation to cash and term deposits is 26 per cent, and this percentage gets smaller as the fund gets bigger. Slattery estimates that when taking out fixed interest allocations, only 13 per cent is held in the form of pure cash.
Multiport technical director Philip La Greca says the average cash holding increased substantially during the global financial crisis (GFC), but is now starting to come down again.
A survey of 1200 of his clients shows that in December 2007 the average fund had 12 per cent in cash, while in December 2008, in the midst of the crisis, cash levels had climbed to 29 per cent.
But at the end of 2009 the levels had fallen to about 22 per cent.
"It certainly went sky-rocketing, as one might expect, during the GFC, but it has also come down," La Greca says.
"Now, will it come all the way down to 12 per cent? It's hard to say."
Asset allocation in SMSFs has long been a topic of debate. Besides the allocations to cash, some critics hold the belief that these funds are used to buy residential property on the cheap.
But this myth has also been thoroughly debunked in the government's summary. The report shows that, on average, only 3.3 per cent of assets are classified under residential property, while commercial property takes up 9.2 per cent of portfolios.
An overall exposure of 12.5 per cent to direct property can hardly be called excessive.
Interestingly enough, allocation to international investments is quite small at 0.5 per cent, but La Greca believes this is more a matter of classification than a reflection of overseas exposure.
"Many people access overseas assets through managed funds," he says.
Trusts and managed investments are listed as separate categories in the summary, but are not split out in the various asset classes. "Our data shows that the allocation is closer to 7 per cent," La Greca says.
Performance
One of the key attractions of an SMSF is the control it gives over superannuation investments.
But this do-it-yourself approach has also created the idea that trustees are unlikely to produce results similar to those of professional superannuation funds. But once again, the summary sketches a different picture.
For the 2006, 2007 and 2008 financial years, the return on assets for the SMSF sector was 12.6 per cent, 16.9 per cent and -6.1 per cent respectively.
APRA-regulated funds with more than four members on the other hand returned 12.2 per cent, 13.3 per cent and -7.8 per cent. Although the researchers say caution should be used when comparing the figures, it seems safe to assume that, at the very least, SMSFs do not underperform other forms of super funds.
"SMSFs have been criticised for generating low returns or returns that are lower than other types of superannuation funds," ING Australia advice and distribution national technical manager Graeme Colley says.
"But [the summary] is indicating the returns are a little bit higher than the larger superannuation funds. That is an average. We see with our clients that they are outperforming the market all the time in an outstanding way."
The summary shows larger SMSFs tend to do better than smaller ones. Colley confirms this phenomenon is also apparent among ING's clients.
"We see, with the work we do with our clients, that the funds which are $1 million plus are much more efficient, because you are able to control the cost much more. And as you can imagine, people are more passionate about $1 million or $2 million than they would be about $50,000-60,000," he says.
He argues that the average SMSF trustee is not some sort of financial wizard, but they do tend to share the characteristic of being able to grasp complex issues relatively quickly, which helps them in achieving good results.
"I wouldn't say they are more sophisticated, but I would say they use their judgment in a better way," he says.
SMSF Strategies principal Grant Abbott says the good performance of SMSFs can partly be explained by their structure.
"These funds are heavily invested in the equity market and they would generally have only 10 to 12 stocks on average in their portfolio. It is extremely concentrated, but it is mainly the BHPs, Woolworths, David Joneses; they are mainly strong blue chips," Abbott says.
"If you are a fund manager or an industry fund with a million members or more, you just can't have that level of concentration because they would be making the market."
The larger funds also have the advantage of having more options at their disposal, he says.
"I would say that the large funds have got advisers or they've got brokers and they do spend a lot of time on their fund in terms of investment," he says.
"When you've got a $2 million or $3 million fund you can buy commercial property, and that has been very popular over the last 15 years, particular in the big funds. A lot of those [commercial properties] are returning 10 per cent per annum."
SPAA research
The release of the summary has left many people hungry for more information, and especially more analysis of trustees' behaviour.
Voices are raised for the government to allocate a more permanent data collection team to this part of the superannuation industry to compile coherent and continual research.
In the absence of such a structured form of research by the government, SPAA has taken the initiative to compile its own research.
The association has a three-year contract with the University of Adelaide under which the university will explore the issue of funding for retirement.
"The [government] report is a nice summary of information that has been around for a long time but hasn't been at the fore of people's thought," Slattery says.
"It is a summary of what has happened in the past."
SPAA's research on the other hand is aimed at gathering new information and providing an analysis of this data.
"There is going to be quite a bit of interpretation of the empirical data," Slattery says.
SPAA will give an insight into the specifics of the research at its annual conference to be held in Melbourne this month.
La Greca says any additional information on the industry is welcome, but collecting a large enough sample size remains challenging.
Privacy issues and people's reluctance to voluntarily share information on their finances are still significant hurdles to thorough research.
"No association is going to be able to say: 'we are going to get every SMSF to send us the data'. The question is then how large is the sample going to be?" he says.
In the end, the data the ATO collects through tax returns may only provide an insight into the industry on a single day, but the agency has one unmistakable benefit over any other researcher, he says.
"One advantage the ATO has as a data collector is that everybody will report to them," he says.
The Cooper review
In the lead-up to the deadline for submissions to phase three of the Cooper review, industry heads say that while the SMSF sector could do with a few tweaks and improvements, overall it is a robust sector and doesn't need to be overhauled.
Australian Prudential Regulation Authority Quarterly Superannuation Performance statistics, as at June 2009, found the SMSF sector boasted $336.1 billion worth of assets, ahead of retail funds at $306 billion and industry funds at $191.1 billion.
Slattery says SPAA does not want to see the industry attacked and hopes phase three of the review will not mean substantial change to the SMSF sector, but rather greater accessibility for those who want to join it.
"The SMSF sector is a robust and growing sector which is outperforming its industry rivals. It has the lowest fees and does not need major amendments or any barriers to entry," Slattery says.
"It is meeting all the government's objectives, has survived the global financial crisis and enables people to provide for their own retirement in the style they choose."
She says she is keen to see contributions caps reinstated to pre-2009 budget limits or reviewed so that SMSFs can be a more viable alternative for more Australians.
Institute of Chartered Accountants in Australia (ICAA) head of superannuation Liz Westover agrees, saying there should also be no minimum balance for an SMSF either as minimum balances would further restrict people who want to establish a fund.
"Approximately 31 per cent of all superannuation assets are currently held in SMSFs, so it is obviously a valued sector and one lots of Australians have chosen as the appropriate structure for their super savings," Westover says.
When it comes to asset allocation, popular opinion among industry groups is that the sector has performed well so no restraints should be imposed as SMSFs are all about choice, flexibility and ownership.
"If a trustee has some form of expertise in a particular asset class, for instance, they should be able to use this knowledge to invest as much of their money in that type of product as they choose," Westover says.
According to Tim Miller, technical services manager at specialist SMSF group Cavendish, whether a trustee invests in one asset class or multiple asset classes, it should be their decision as long as they have properly considered everything.
Among other things industry groups don't want to see introduced is mandatory trustee education.
While all placed great importance on trustees being informed and up to date with their roles and responsibilities, there is more concern about introducing education standards for advisers, administrators and auditors working in the sector.
Slattery says as long as trustees stay informed and continue to abide by their roles and responsibilities, it isn't necessary to introduce compulsory education.
It is more important that SMSF professionals are the experts as that is what will lead to greater protection and advice provided to trustees, she says.
"SPAA would like to see professionals who operate in the SMSF space become more specialised so that they can be of greater assistance to trustees," she says.
"The focus should be on professionals becoming more qualified, particularly as there are currently no mandatory requirements for those advising trustees."
Under the Superannuation Industry (Supervision) Act an approved auditor of an SMSF must be a member of one of a number of recognised industry bodies, such as the ICAA or CPA Australia.
"SPAA has recently been included on this list, but has higher standards of approval so that auditors are recognised as specialists in the SMSF field. For this reason we recommend auditors under SPAA be the auditors of choice when it comes to SMSFs," Slattery says.
According to Miller, with auditors doing less than an average of 35 SMSF audits a year, many are of the belief that it is not enough.
He says if more auditors were specialised it would leave less room for compliance errors and more time for the regulator, the ATO, to concentrate on other things.
According to Association of Superannuation Funds of Australia chief executive Pauline Vamos, considering so many accountants provide limited advice on SMSFs, restrictions preventing them from providing more in-depth advice should also be removed.
Westover says whether accountants are given greater powers to provide more advice on SMSFs will depend on the practical implications.
Another topical point among industry groups is revising the number of trustees that can be tied to an SMSF, of which the current limit is four.
With recognition that SMSFs are designed for closely-held groups and families, there is a lot of discussion that all family members who want to operate their super together be allowed trustee status and thus an equal say in how their fund is operated.
Westover says: "We think four is an appropriate number of trustees, but there should be an allowance in cases where a family might have three or four children for instance."
Miller says: "More than 10 would be too many as trustees must sign and agree to all decisions made, which increases the administration burden."
Regarding the performance of the ATO as the regulator, industry groups say communications and guidelines provided to those operating within the sector are efficient and they would like to see the ATO receive increased penalty powers as well.
Slattery says currently if an irreversible error is identified by an auditor, penalties are very black and white.
Vamos says regulation must be appropriate and the small proportion of bad eggs weeded out, however, flexible penalties must be adopted.
"Penalties for minor infringements in some cases are too harsh," she says.
Overall, with super savings across the board largely underweight, the general feeling about the future of the SMSF sector, according to industry groups, is access should be supported and more professionals should become specialised.
They say it is a robust sector and one that reflects the changing needs of many Australians who now want control over their investment portfolios.
