A Wollongong-based financial advisory and mortgage broking group has been slammed by the Australian Financial Review (AFR) for potentially enticing clients into breaching tax laws and undermining investor protection.
Laura Dean Financial Solutions offers luxury international holidays to investors who take out a mortgage and buy a house using their SMSF. The company’s online and television ads depict an investor on holiday in Hawaii, encouraging his father to take up the offer and receive a ‘free gift’ by using his superannuation fund for a limited-recourse loan to buy a house.
Furthermore, AFR claims laws intended to stop financial advisers from receiving commissions and replace them with fees are likely being ‘undermined’ by products and services where they don’t apply, such as property sales.
Australian Broker attempted to contact directors at Laura Dean this morning but were told no one was available to offer media comment.
Encouraging investors to set up self-managed super for a holiday could also breach the ‘sole-purpose test’ – that a scheme should only be providing benefits to members on their retirement (or their dependants in the case of the member’s death before retirement).
“Many people do not understand the sole-purpose test and following the advertisement’s advice could result in a breach,” Adviser Meg Heffron, who was on the advisory panel of the Cooper review into the super system, tells AFR.
The SMSF area is one of the country’s fastest growing financial sectors, accounting for around $500 billion of about $1.6 trillion in retirement savings - the world’s fourth-largest pool of managed funds.
Roughly 4% of the population account for the 506,000 schemes, with the number expected to double by 2020 and assets quintuple for 2030.
The AFR says many financial advisers are being offered incentives to put their clients in SMSF property investments, with promises of generous fee and commission hikes by recommending property companies.