In the world of superannuation, the battle lines have long been drawn between Self-Managed Super Funds (SMSFs) and Industry Super Funds. One side touts scale, simplicity, and passive investing prowess. The other champions control, flexibility, and tailored strategies.

For years, Australians have been nudged towards industry funds by default. These behemoths have invested heavily in advertising, spent billions on infrastructure and private markets, and held the moral high ground as “low-fee, member-first” organisations. But what happens when the cracks in that narrative start to show?

A recent article in the Australian Financial Review has peeled back the curtain, revealing uncomfortable truths about governance failures, opaque decision-making, and a stubborn reluctance to change within some of the nation’s largest industry funds. For anyone still undecided in the SMSF vs Industry Super debate, the revelations should prompt a moment of reflection.

The Industry Fund Mirage?

The recent governance reviews into BUSSQ and Cbus, both prompted by APRA due to concerns over CFMEU-linked spending and director suitability, highlight an inconvenient truth: some industry funds still lack the governance rigour you’d expect of entities managing billions in retirement savings.

The BUSSQ review by KPMG found that:

• Director appointment processes were undocumented, with qualifications and referee checks not properly verified.
• Significant spending on CFMEU sponsorships lacked sufficient business case analysis.
• Director training was minimal, with even a basic AICD course deemed an appropriate next step.
• Reporting of union-linked payments and board fee reviews were deemed insufficient.

In short, the fund may have passed the “fit and proper” test for its directors on paper, but the systems, processes, and culture underpinning these decisions were described as lacking. The governance process, not just the outcomes, fell short.

The reaction? Instead of welcoming scrutiny and striving for improvement, BUSSQ took the regulator to court. And when that failed, its executives dismissed the report’s findings with a baffling level of self-congratulation.

These aren’t isolated incidents either. The Super Members Council, an industry fund lobby group, argued that APRA’s tighter oversight might distract boards from their core responsibilities. One might ask: if better governance is distracting, what exactly have the boards been doing until now?

SMSFs: Imperfect, But Empowered

Now, SMSFs aren’t perfect either. They require time, effort, and attention. Mistakes can be made. But the key difference is this: SMSF trustees are accountable to themselves.

They don’t need to fight for access to reports, wonder about conflicts of interest, or question where their retirement savings are being allocated behind closed doors. If you’re in an SMSF, you’re at the table, not on the menu.

Critics of SMSFs often point to costs, complexity, or sub-scale issues. But these are increasingly outdated concerns. Platform technology, digital record-keeping, and low-cost trading options have made SMSFs significantly more accessible. In fact, for balances north of $300,000, SMSFs are now highly competitive on a cost basis, and far superior in terms of control, transparency, and flexibility.

You can tailor your asset mix, control your tax strategy, and even allocate to niche or thematic investments, something industry funds still struggle with unless it’s wrapped in private equity jargon and a seven-year lock-up period.

And unlike industry funds, your SMSF won’t spend millions on union sponsorships, stadium naming rights, or advertising campaigns starring cheerful retirees on bicycles.

The Governance Gap Is an Investment Risk

Why does this matter? Because at its core, bad governance is a risk to returns.

If directors aren’t being properly vetted, if spending lacks justification, if performance and accountability are brushed aside, how confident can members be that decisions are being made in their best interests?

SMSFs offer a counterbalance. They embody the principle that no one cares more about your money than you do. In a well-structured SMSF, you know what you own, why you own it, and what it costs. You can avoid exposure to opaque unlisted assets, manage your liquidity, and maintain clear oversight on capital preservation.

Moreover, SMSFs allow investors to apply their own values. Whether it’s ESG, income generation, small caps, or infrastructure, you can build a portfolio that reflects your worldview and financial needs, not those of a boardroom committee with external affiliations.

A Wake-Up Call for the Sector

The AFR piece should serve as a wake-up call. As the super industry swells past $4 trillion in assets, the stakes are too high to tolerate mediocrity in governance. Australians are right to expect more, not just from returns, but from process, transparency, and accountability.

That doesn’t mean all industry funds are flawed. There are well-run, high-performing options in the mix. But the assumption that bigger is always better, and that the default option is also the best, is increasingly worth challenging.

TAMIM Takeaway: Consider the “S” in SMSF

For too long, the industry conversation has focused on performance and fees. But governance is the silent ‘S’, the structure behind every investment decision that determines outcomes over the long term.

If the cracks are showing in some of Australia’s most storied super funds, perhaps it’s time for more investors to ask the uncomfortable questions. SMSFs may not be for everyone, but for those who want control, transparency, and accountability, the appeal is growing by the day.

The tools, platforms, and advice now exist to help trustees run highly efficient, well-governed SMSFs. And unlike some boards, they don’t need a regulator to remind them why governance matters.