Bank of Queensland (BoQ) has identified SMSFs as a key target in the bank's corporate strategy for the wealth management market and has laid out its two-pronged approach to the SMSF sector.
Speaking to SMSF Adviser, BoQ’s general manager, wealth management, Tony Cahill said the bank is targeting SMSFs on two fronts – as a source of funding, and to grow its loan book.
Given that SMSFs have typically had an allocation of between 25 and 30 per cent to cash, BoQ is looking to the sector for a “range of deposits”, he said.
“There is around $140-odd billion of deposit money [in the SMSF sector] so we’re looking to take our share of that,” said Mr Cahill.
BoQ is also looking to make it easier for SMSFs to interact with it, with improvements in transactional data for accountants and new SMSF software, he added.
While BoQ is taking a conservative approach on the loan book front, it has “quite an explicit strategy” around the types of SMSFs it lends to.
Mr Cahill said the bank is “definitely trying to avoid” the market of funds with low balances, where investors have been enticed into buying a unit off the plan.
“We’ve got criteria around the minimum size the fund has to be before we’ll deal with them,” Mr Cahill said.
“We won’t lend for small inner-city apartments – less than 50 square metres, for example. And we require that the fund have some liquid assets post the transaction so that it’s not under any immediate financial stress.
“So that book’s going reasonably well. There’s lots of business that I guess we’ve missed out on, but it’s business that I think would come back to haunt us over the next couple of years,” he said.
This follows BoQ’s stating it sees the lack of regulated advice in the real estate sector as one of the “driving factors” behind consumers establishing SMSFs that are not appropriate for their circumstances.
In its submission to the Senate economics standing committee’s Inquiry into the Provisions of the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, BoQ 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.”
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