SMSF Professionals Association (SPAA) NSW chapter treasurer James Power told ifa that mortgage brokers are increasingly targeting SMSF clients.
“The biggest risk in the SMSF space at the moment is the mortgage broking fraternity thinking they’re financial planners and going ahead and providing product advice,” he said.
“I have seen some dangerous activity first hand and some of these brokers try to either avoid the financial planners or get the planners to sign off on a form without a client actually going through the advice process with a planner.”
Power, who is an SMSF specialist adviser at CXC Financial Partners in Sydney, says he was not aware of the influx of mortgage brokers in the industry before he began mortgage broking himself 18 months ago.
In many cases, the mortgage brokers operating in the SMSF sector are not qualified to do so, he said.
“There’s a real push coming from the [mortgage broking] industry that there are huge loan opportunities in self-managed super and subsequent property investment, and this can lead to terrible advice because they don’t know what they’re doing,” he said.
Power called on regulators to introduce higher educational requirements for mortgage brokers providing product advice, akin to the RG146 qualification for financial advisers.
While there is broad convergence between the mortgage broking and planning industries, he said this is “particularly dangerous when it comes to SMSFs due to the intricacies that can arise”.
The best way for these mortgage brokers to get qualified advice on SMSF set up for their clients is to become a Supershift Tier 2 affiliate, that way they can simply refer their client to their linked Tier 1 Financial planner for specialist advice on setting up a SMSF and if the client qualifies and sets up a SMSF the mortgage broker gets paid a referral fee! That way the clients happy with specialist advice, the mortgage broker is happy with his fee and SuperShift sets up a complying SMSF with the opportunity to purchase property.
The news that mortgage brokers are focusing on the SMSF market is not new. As brokers need to be licenced and so there is some protection for the consumer(trustees. Of greater concern is the providers of the prerty (either builders/promoters/real estate agents.
There is no licencing regime here – there is no legislative carve out – yet the regulator is silent. Anyone promoting real estate as an investment (whether it is held in an SMSF or otherwise) should be required to hold a financial planning licence. Property is sold as a tax effective investment so the promoter should also hold a tax agents licence.
Will there need to be another “Henry Kaye” scheme/arrangement before the regulator takes action. If the regulator does not have the power to act then they should ask for it – urgently.
Some of us have been warning on this for a while-real estate agents and brokers offering advice —I mean selling- without our great regulators cracking the whip. when it goes to putty-who gets the blame. About time some pro active action rather than passive after the event–sounds like a storm brewing again