If I can pass the object by reference to a function, then is there a need to use shared pointers?
Not if you know the lifetime of your object and it won't be deleted before the function has finished. You may find scoped pointers useful though: http://www.boost.org/doc/libs/1_43_0/libs/smart_ptr/scoped_ptr.htm
I use shared_ptr like a "poor-man's" garbage collection. Instead of having
Ahh, being a c++ developer I see garbage collection as a poor man's raii (you can't even control when something is destructed for gods' sake ;))
Maybe I am using shared_ptr wrong but at least for my project it seems to work well.
Scoped_ptr offers the automatic memory management you discuss without the additional functionality of shared_ptr (i.e. shared_ptr is a scoped_ptr with added reference counting functionality)