Brokers and property advice: The $115 million question

by Mackenzie McCarty01 May 2013

First, the $115 million question: According to newly-released ABS figures, investment housing commitements rose 1.5% ($115m) in February, a positive sign for the property market. So, is now the time for brokers to start offering property advice and, if the answer is yes, how should they become accredited to do so?

Property Investment Professionals of Australia (PIPA) chair, Ben Kingsley, says signs of a ‘renaissance’ in the Australian property investment market point to strong opportunities for brokers interested in expanding their service offering.

“Market forces are currently aligning to produce what are arguably the best property investment conditions we have seen for some time,” he says, “bringing with them a new wave of investment activity and great opportunities for financial services professionals, including brokers.”

Kingsley goes on to encourages brokers to undertake PIPA’s Qualified Property Investment Advisor (QPIA) course in order to gain some kind of accreditation in the industry.

But Sydney-based broker and property investment advisor, Kevin Lee, says he’s concerned brokers may be rushing into an area they know little about and which is largely unregulated compared to other branches of the financial services industry. Given the lack of Federal Government-initiated regulation, he says, how can brokers be sure that the education they receive in the area is valid?

“It looks like [PIPA] are holding themselves out as an organisation qualified to provide credentials to brokers…If so, who accredits the accreditors?”

Furthermore, he asks, “How many brokers are sufficiently skilled and/or experienced to be able to provide a level of advice that can be trusted?”

Kingsley says the QPIA course, originally developed by a division of Deakin University as an accreditation program to achieve a professional industry award, consists of content devised by ‘highly skilled industry professionals with vast experience and expertise within their specialist disciplines within the property, financial services and training fields’.

“It was aligned with the Financial Services Reform provisions of the Corporations Act and with ASIC Policy statement 146 training requirements for regulated financial services. In 2012 the course was updated further by additional professional practitioners and is now administered by PIPA.”

A QPIA, he says, is a formally educated, qualified property investment specialist who can advise investors on individual property selection, as well as develop a long-term property investment strategy that meets the client’s individual needs.

Lee remains sceptical, but says it essentially comes down to the following: "Free advice is worth the price you pay; if you’re going to provide professional advice and charge for that advice, then that’s a whole new ball game.”

But he and Kingsley can agree on one thing: both believe ASIC should eventually be charged with regulating the property investment industry.

“Too much money is at stake for [the government] to continue to turn a blind eye to the crooks and thieves in the industry,” argues Lee. “Just 10% of investors have more than two investment properties. What role has a property adviser already played in the life and fate of the other 90%?”

“Most, if not all, of [property investors] would probably have one negatively geared investment property. And after they were convinced, conned or sold into that property by their adviser, accountant, financial planner, real estate agent or the bloke in the pub, they figured it was no way to go forward.”

Kingsley agrees, saying the Federal Government needs to introduce legislation to regulate property investment advice.

“ASIC is the natural fit to enforce this legislation. They (ASIC) are being introduced to the property investment industry via the growing promotion of property investing via an SMSF, which is regulated as a licensed investment product, but more needs to be done in protecting consumers who buy outside of super, with is the vast majority of people.”

COMMENTS

  • by Moonae 1/05/2013 9:55:20 AM

    Sure - I'll embrace the unregulated property advice industry. My advice - Property is transactionally expensive especially short term, doesn't perform over the long term as well as Shares, doesn't have the concessional benefits of Super as a vehicle and if invested in Super needs to be done through SMSF which is prohibitively expensive and complex. Oh - and I forgot, ask anyone today giving advice on property and they are invariably in the real estate industry as sales people working for sales firms selling their own stock or properties they are agent for. Buyers agents are also unregulated. So lets redraft the question shall we - Property prices are on the up again, people think they can make a buck investing in property lets turn our attention to these often ill informed investors and get our share. I'm feeling a little cynical today.

  • by Wayne 1/05/2013 10:11:20 AM

    Brokers giving advice on which property to buy suggests conflict of interest issues. Do agree that if all other areas of financial advice is regulated then this is the one loophole the crooks have crawled through. Developer has property for sale at a price and the spruiker comes along and adds $40,000 to the price for himself. Should brokers spruik for sales of property? Sure - if the industry was regulated to get rid of the crooks. Oops I forgot, the government only thinks brokers are the crooks !!!

  • by Peter Fast 1/05/2013 10:17:28 AM

    Property investment remains unregulated (probably will always be that way) and while it does there will be questions about involvement in giving "advice" about property investment. Agents and spruikers in particular don't give property advice, they give factual information ... or so they say. So while our industry is raising it's professional status any widespread industry move into property "advice" could see that compromised without legislation to oversee real estate investment advice and I just wonder what sort of PI cover a "property planner" has these days?

    Our industry bodies also need to ensure that the Finance Broker Industry is not tarnished by involvement in inappropriate property "advice".

    Let the buyer beware!!