Speaking to ifa sister title SMSF Adviser, Ms Brown – a former AFA Adviser of the Year – said the advice and SMSF industries would benefit from the Murray Inquiry proposal.
“Property spruiking has been really detrimental to our industry and could potentially blow up if the property sector continues to give incorrect advice to set up SMSFs,” she said.
“I’d like to see property spruikers having the same regulations as we do as financial advisers; the [property sector] needs to be a lot more highly regulated and I think that’s what’s causing our issues.”
However, she also said the use of LRBAs for the purchase of commercial property for business owners should be retained.
“For business owners buying the business premises they are working out of, I think it’s a great strategy and should be allowed,” she said.
Yes it would be good to get rid of the property spruikers by making property a financial product when sold to a SMSF. If they can make a SMSF structure a financial product they can do it to property also. But why should it be restricted to comeercial property owners. All that will do is make people who would like to but property but it in a family trust or their own name. Why can’t they buy it also in a SMSF as a LRBA. Everyone seems to forget that the LRBA is no riskier than a normal borrowing by Mum and Dad to buy a Rental property. In fact it is much harder to get as a result of the Banks approach to them. If borrowing is to be removed from SMSF it MUST be removed from all superfunds – for this so called level playing field that the public offer funds say they need. To stop LRBA removes a legitimate & beneficial way to increase retirement savings enabling a reduction in the funds required for aged pensions. The bigger picture needs to be looked at here.
I agree 100%. I used to work for a property spruiker disguised as a financial planning firm and was disgusted to see that the conflict of interest was not disclosed due to my employer claiming that its property purchase recommendations came under the property sector rather than the financial sector. I hated seeing almost every client come through the door who could afford a property being recommended it, in their own names and SMSF, even if they were age 69 or if the SMSF could barely support the recommended geared investment property.
What is the negative/positive differences between purchasing a commercial property vs an investment property using LRBA’s? A business can go broke as well as an individual plus many other risks.
What should happen is that anyone contemplating buying property using a SMSF must have an SOA attached to any property contract. One big problem – The Financial Planning Industry itself! FP’s recommend banking/insurance products with ease but won’t get involved because of licensing (PI) in recommending direct property. There are plenty of examples of people getting ripped off by FP’s – Don’t complain if you are not willing to be part of the solution.
Jenny has hit the nail on the head with this issue.
Jenny, well said. My only comment is LRBAs are good form of investment if done the right way, It seems a pity to marginalise out, spruikers via the back door.
ASIC should have the determination and upfront wisdom to regulate the property industry head on, and make it advisory Once reguated, this asset allocation may be seen in a better light by licencees to be involved with, and included on APL’s
Peter
The Spruikers will move on to exploit Australian’s love of property. My guess is they will actively promote taking lump sums from super after age 60 and leveraging it up with higher LVRs than in Super. We will see more people hoping for a property miracle to save their retirement only to face retirement with debt and rising interest rates.
I still believe Super and SMSFs can play a part in meeting people’s investment wishes but we need tighter LVRs ans maybe age based limits in gearing.
However as Jenny has hinted the main problem is Spruikers and overpriced properties or poor locations like one focus mining towns. That needs regulation and banks to be prudent in their lending
Borrowing in super is not the problem. Whether it’s viable and a good investment is for the trustees and their advisers to determine. The problem is with people who promote products that are not in the best interests of the client. Some of these people are unethical, unprofessional, greedy or just plain ignorant.
These people have been and still are selling to people outside of super, overpriced properties and with inappropriate finance arrangements.
The legislators have made the use of LRBAs a costly and cumbersome exercise and this needs fixing too.
So Jenny Brown is not a spruiker ?!