SMSF property pimps in the firing line

by Mackenzie McCarty19 Apr 2013

ASIC has announced plans to heavily focus on SMSF property investment professionals in coming months, in an effort to thwart ‘spruikers’ in the industry.

The regulator’s CEO, Peter Kell, says that a certain level of market confusion when it comes to operators recommending that investors purchase a property through an SMSF, with some mistakenly thinking they don’t require and AFS licence.

“Let me be very clear – a person requires an AFS licence if they recommend that an existing or proposed member of an SMSF purchase a property through their SMSF,” says Kell. “This is because the vehicle through which the underlying investment is made is an SMSF and an interest in an SMSF is a financial product. It does not matter for licensing purposes that the underlying investment (real property in this case) is not a financial product.”

In the past year, Kell says ASIC has seen an increase in the number of advertisements pushing property purchases through SMSFs.

“We do not want to see SMSFs become the vehicle of choice for property spruikers. Where we see examples of unlicensed SMSF advice we will be taking regulatory action.”

The Property Investment Professionals of Australia (PIPA) has welcomed the increased focus on SMSF property investment advice regulation and says it also applauds the regulator for its recognition of ‘concerning property spruiking activities’.

PIPA chair, Ben Kingsley, says that with SMSF numbers growing at a rapid pace, ASIC’s decision to focus on this area is a positive move.

“Such news is welcomed strongly by PIPA, who has long held grave concerns about property spruikers, particularly those targeting SMSF investors,” says Kingsley. “As ASIC would be fully aware, reports of Australian investors suffering at the hands of unscrupulous marketeers are all too common and such cases have the potential to explode as interest in property investment via SMSFs continues to grow.”

But not everyone’s happy about the increased scrutiny. BGL Corporate Solutions managing director, Ron Lesh, says property spruikers aren’t a major issue in the industry.

 “It’s not like we’re seeing that there’s a lot of SMSFs buying bad property. I think it’s more people jumping up and down and looking at some way that they can attack the SMSF industry,” he says.

“Generally, in most cases, if SMSFs are going to buy property they’ve discussed it with their adviser beforehand. I don’t think the spruikers are a big deal and we’re not seeing a lot of evidence to support the fact that they are. I just think we’re seeing a bit more of PR stuff out there.”

COMMENTS

  • by stephen mcclatchie 19/04/2013 9:58:00 AM

    Interesting article, I attended an SMSF training seminar yesterday and thought i would be learning about a lenders SMSF product and all the 2 hours was about was trying to secure my database so the company hosting the event, Investors Direct could market my database to sell them supposedly good investment property via an SMSF structure they were selling. Spruiking?? Oh and they proudly offered me the lowest referral commissions in the industry.

  • by Chris C 19/04/2013 10:10:41 AM

    I fully agree ........ many times over the last few years of slow property sales, I have had clients come to me with Superfund purchase scenarios that did not make sense for many reasons but because their 'real estate agent' had told them they could buy it in Super because that's where they most likely held their deposit, they were keen to try. Referral to their Accountant and/or Financial Planner in most cases, suggested it was not the best way to go. In these cases, the client was better off purchasing outside super for gearing and a much better return. I lost quite a few deals but I am happy my client is better off for it. Not knocking all real estate agents of course; many do the right thing but there are still a few cowboys out there willing to promote things to which they are not qualified or licenced.

  • by Papery 19/04/2013 12:40:40 PM

    Bring it on....Im seeing too many less than sophicated people geting led to the SMSF property gearing trough by sales people not claiming to give advice but doing exactly that & playing down the FP's role, especially when it comes to the diversification & risk piece...just bec they hve enough of a deposit in their Super! and lets not get started on disclosure & conflict!