In its submission to the Senate economics standing committe's Inquiry into the Provisions of the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, Bank of Queensland recommended the provision of advice on the purchase of property, other than for owner occupiers, be included in the definition of financial advice.
“Real estate purchases by consumers represent significant investments of wealth and almost always involve some element of debt. It is an anomaly that advice provided on such significant investment decisions is not regulated in the same way as advice on similarly significant investments,” the submission stated.
“There is no valid reason for the financial services licensing system not to apply to advice with respect to real estate investments. Inclusion of real estate advice would provide a consistent framework for advice standards across all major asset classes.”
BoQ also believes that the lack of regulated advice in the real estate sector is a factor that contributes to investors' establishing SMSFs which are not appropriate for their circumstances.
For example, those consumers might have a fund that is “too small to be economic” or could be an inappropriate trustee candidate, BoQ stated.
The Property Investment Professionals’ Association of Australia (PIPA) has long argued that if property is being purchased for investment purposes, it should be considered a financial product.
“It’s very encouraging that a bank who profits from lending money has the courage to speak up about regulating the property investment industry,” PIPA chair Ben Kingsley told SMSF Adviser.
“If direct property investment was regulated, we would see less wild investment return claims from some spruikers and a more sensible and mature property investment industry which can only lead to consumers' making better decisions about whether, on balance, buying property in an SMSF is the right decision for them.”