In an earlier Super Advisor article (Asset allocation gets personal) we said that self-directed investors have the advantage of coming up with a 'personalised' asset allocation. But they can also end up with a lack of diversification.
A typical example is self-directed investors with an investment property. If you've got a $10 million dollar portfolio then you can probably afford to buy a property or two without being too exposed to them. But most don't have that luxury.