SMSF confusion putting Aussies' retirement at risk
By WP | 18/03/2013 12:00:02 AM | 9 comments
Property Investment Professionals of Australia (PIPA) says it's growing increasingly concerned over a perceived lack of regulation surrounding property investment, particularly with regard to SMSFs and is calling on ASIC and the Government to take action.
According to the organisation, financial services professionals remain tentative as to just who can legally guide SMSF customers through the process of investing in property.
PIPA chair, Ben Kingsley, says despite repeated public discussion, professionals in the financial services industry remain confused as to who can recommend property for investment within an SMSF.
“If industry professionals are confused, then what hope does that give us that consumers will navigate this investment channel successfully?”
With SMSFs attracting a growing number of Australians, many of which are looking to invest in property, Kingsley says the lack of appropriate regulation is putting the retirements of millions of Australians at risk.
“Once again, we are calling on ASIC and the federal government to get up and take action and regulate property investment.”
He admits that the vast majority of brokers, accountants and financial planners do their best to help clients make smart investment choices, but a lack of regulation leaves consumers vulnerable to less scrupulous operators, namely ‘property spruikers’ and marketeers.
Furthermore, despite good intentions, Kingsley says many well-meaning professionals simply don’t have the qualifications to provide sound property investment advice.
“PIPA’s message to anyone operating in the financial services space where property investment is involved, including self-managed super, is to look after the customer where you are qualified.”
“PIPA remains dedicated to seeing property investment in Australia regulated,” says Kingsley, “But in the meantime, we are calling on financial services professionals to work together in the best interests of Australian consumers and towards the greater goal of increasing the professionalism of property investment advice in Australia.”
Do you think there should be tighter regulations on who deals with SMSF investments?
Bruce on 18 Mar 2013 11:02 AM
This is rubbish for a number of reasons, firstly it the Trustee of the fund who makes the investment so he/she needs to if necessary seek advice on an appropriate property we don't need a regulated property market, we need some good Trustee education and access to advice that is already there
Sheila on 18 Mar 2013 11:07 AM
Best of luck PIPA and I will definitely look into joining your association. You have a big job trying to convince the “less scrupulous operators” and the “Property Spruikers” out there to conform... the “well meaning professionals” like my fellow Financial Planners would be the least of your worries.
It would be like herding cats!
Leanne on 18 Mar 2013 11:17 AM
Definitely especially when you receive emails like this:
Dad asked me to contact your office to an update you on my purchase of the property from my Uncle so he can pay his Fee’s to enter Aged Care.
Yes I am definitely buying the house but my accountant wanted me to purchase using my super funds. At the time of signing the contract all of my super was spread across several funds.
The accountant’s advice was to create a SMSF to purchase the property. It has been more involved than he conveyed but we are in the final stages now.
I started the process with solicitors in B’bane in December going through the legal channels of creating a company and trust deeds to own and operate the fund, and then I had to wait 28 days for the company to get an ABN.
For the purchase to be tax efficient and beneficial to the super fund, I could not pay all moneys directly to my Uncle and the accountant wants me to borrow as much as possible.
I could not apply for a loan for the balance of funds until this structure was fully in place, and it had an ABN.
From Mid January I applied to the existing roll over funds to transfer funds into the new SMSF of which it is now almost all in that account.
The final stage now of the finance approval for the SMSF is for another deed to be drawn up by the lender, this is to be finalised this week.
At this stage I am to contribute 20% of the $170,000 purchase price and borrowing the remaining 80% from the bank.
I am sorry about the delay and the issues it is causing my uncle, but I have rushed into too many properties over the years using the wrong structures and have paid dearly for it! I will keep you updated with the progress and the outcome.
Peter Johnston - AIOFP on 18 Mar 2013 11:19 AM
Agree, and lets dont forget the Ministers encouragement for consumer to swim between the flags but he is encouraging them to deal in non APRA regulated structures and invest in non ASIC regulated markets. This whole SMSF sector is a accident waiting to happen.
Pat on 19 Mar 2013 08:41 AM
Peter, to quote the Super System Review: "The SMSF sector is largely successful and well functioning." I fail to see how this is an accident waiting to happen.
Now, you harp on about the fact that funds like Astarra/Trio were regulated by APRA and ASIC yet still failed, and now you think that non-ASIC/APRA regulated funds are "an accident waiting to happen". Make up your mind.
I am not sure you fully understand the system.
Innocent Observer on 20 Mar 2013 10:24 AM
The problem isn't "SMSF Confusion", as the title may suggest. It's the systemic problem of having property spruikers, mortgage brokers & sub-par financial advisers jumping on the Australian residential property love-affair band-wagon. For those willing (through ignorance or genuine belief) to sell the perceived advantages of this approach, the rewards (financially speaking) can be great. But if that's the primary driver (and in most cases it undoubtedly is), then it can hardly be called financial advice. Perhaps if property was a regulated product things would be different. I don't know. Allowing gearing within super is, in my opinion, a very poor decision. Is it any surprise that many of the dodgiest deals (and advisers) out there build their business through leveraging their clients? Finally, remember: for every Aussie it goes pear-shaped for, we - the taxpayers - ultimately have to pay.
Pat on 20 Mar 2013 12:21 PM
Innocent Observer: if one sees a problem with gearing in a SMSF, then one must have a problem with gearing as a whole. I agree, probably a very large proportion of massive failures in Australia relate to gearing: think property scandals, Storm, etc.
At least, within an SMSF, a trustee has some specific provisions to seek damages should things go pear shaped as a result of poor advice.
Pat on 20 Mar 2013 01:30 PM
Interestingly, walking through the local shopping centre, I saw a kiosk from one "Allied Investment Group" flogging property in super. A look at their website says they "tailor a solution"..."to their family's needs". Now, not wishing to be too cynical, I can't see a firm who needs a shopping centre kiosk to flog their wares to targets passing by as a firm that "tailors...solutions".
I had a client who went to an "adviser" who, within an hour of meeting her, had recommended she set up a SMSF to borrow to buy a property (they were flogging) in St Marys.
The problem isn't SMSFs or gearing, it is the lack of regulation of dodgy property sales people flogging the one solution to everyone. No different to Storm, just different asset class.