Super Nation is a fortnightly column that examines, explains and analyses key issues in one of Australia's largest, fastest-growing and most important industries: superannuation.
A nurse responds to a Facebook advertisement urging her to switch her superannuation from a large and well-performing industry fund into a self-managed super fund (SMSF).
Promised by a sales agent that the returns from the SMSF would be higher, she believes this will allow her to pay off her mortgage and have enough for retirement after a lifetime of dedicated service.
The hard-working frontline health worker agrees to make the switch but discovers her savings have been invested in a property fund that is ultimately frozen, according to SMSF specialist Liam Shorte, who is relating the sad story.
“So she’s looking a loss over $405,000,” he told Azzet.
Shorte, a financial planner with Sonas Wealth, said younger people in particular were vulnerable to social media posts from lead generators who pass on the details of suitable prospects to financial advisers, investment firms and others.
It was a pattern made familiar in the $1 billion collapse of the Shield and First Guardian master funds.
In fact, many people invested in Shield and First Guardian on the advice of a licensed adviser, said Super Consumers Australia (SCA) Chief Executive Officer (CEO) Xavier O’Halloran.
“Good advice could prevent people from moving into super products that aren't right for them, like starting an SMSF they don't have the time to manage, or investing in things that are much higher risk than they want to take on,” he said.
“But bad advice has led to thousands of people losing everything.”
Short’s clients had told him their children had grown up without loyalty to large service providers such as super funds.
“We try and warn them you don’t move for the sake of moving for the sake of small incentives. The ones setting up SMSFs, and there’s a large amount in their 30s, … want more control. They want more choice,” he said.
Switching on the rise
The problem is troubling the major industry funds whose peak body, Super Members Council, recently expressed concern that switching between funds had risen 17% over the past year.
This included those moving retirement savings from industry and other profit-to-member funds to SMSFs or wealth platforms providing access to retail and other funds.
“Rather than older retirees with high balances moving money to coincide with changes in life circumstances, switching activity is now being dominated by younger Australians with lower super balances,” SMC said in a media release.
In 2024–25, more than 70% platform switchers and 61% of SMSF switchers held under $100,000, with an average super balance of just $21,700, SMC research showed.
While research suggested a $200,000 may be a rule of thumb for viability, SMSFs with more than $500,000 were often considered to be more competitive relative to funds regulated by the Australian Prudential Regulation Authority (APRA), said Deloitte Australia Actuarial Consulting Partner Andrew Boal.
SMC said about 70% of members switching did not have a financial adviser, suggesting this activity could potentially be driven by social media, lead generation or third-party influences and not by long-term professional financial planning.
SMC General Manager Strategy and Insights Matt Linden said that although high net worth people were doing well in SMSFs, people with lower balances could be worse off if they switched from APRA-regulated funds.
“It can be challenging for SMSFs to stack up for people with low superannuation balances to invest,” Linden said in an interview.
Social media posts encouraged people to switch their funds or set up SMSFs and pour their savings into cryptocurrencies, gold and other “boutique” investments.
“That means they don’t have diversification in their retirement savings, which is not a good thing and exposes them to a lot of risk,” Linden said.
Acting on advice
The importance of getting quality financial advice before changing funds was underlined by ASIC in a report in 2025, which reviewed the quality of advice about establishing an SMSF.
The regulator found 62 of the 100 retail client advice files it reviewed did not comply with the best interests duty and related obligations, and 27 files raised significant concerns about client detriment from the SMSF recommendation.
Almost two-thirds of Gen Zs (those born between 1997 and 2012) were using social media, and one in five were using artificial intelligence to make decisions about their financial future, said ASIC.
“High levels of trust in often unreliable sources by some young Australians is contributing to riskier financial decisions such as investment in cryptocurrency based on limited or unproven information,” the regulator said in a media release.
Monash University Professor, Banking & Finance, Susan Thorpe, said while large funds were regulated by APRA, SMSFs were checked by the ATO for compliance with regulations, which detected failures after they occurred.
“Prudential regulation can have safety benefits for small investors over compliance regulation,” Thorp said.
Large fund accumulation products were also performance tested by APRA, but research showed many SMSF members did not assess performance adequately.
“Compliance costs - either employing a financial professional to help manage the fund or taking on the administrative burden yourself - favours scale in SMSFs,” she said.
SCA CEO Xavier O’Halloran said research showed the number of SMSFs created had grown about 16% over the last six years with research suggesting an increase in people moving to platforms.
“Social media advertising and cold calls are certainly one driver, though these switching schemes often involve a licenced financial adviser (many platforms only allow someone to join if they have an adviser),” he said.
But SMSFs and many products on a platform were not performance-tested by APRA, while fees, especially for SMSFs but also for platforms, were often higher, which could leave people worse off than if they had not switched.
“You can't just set and forget a platform or SMSF - there's work involved in managing your money. SMSFs also have a lot of regulatory paperwork like tax returns and financial reports,” O’Halloran said.
A 2019 Productivity Commission report showed that underperformance and higher (0.5%) fees could result in a person having $660,000 and $100,000 less super respectively, at retirement.
Deloitte Partner Andrew Boal said wrap platforms were often a more cost-effective option than establishing an SMSF for members with lower balances.
“These platforms are commonly used by financial advisers to provide tailored investment portfolios and greater investment choice until the member’s balance reaches a level when establishing an SMSF may be more appropriate,” he said.
