Vanguard ‘wary’ of leveraging in super

Vanguard ‘wary’ of leveraging in super

Leverage in superannuation has the potential to “undermine system stability”, according to Vanguard.

Speaking at a media briefing last week, Vanguard’s head of market strategy and communications Robin Bowerman expressed concern about leveraging in superannuation.

“If it’s being done poorly, without advice, often things can end very badly. So we’re wary of it,” Mr Bowerman said.

Speaking to SMSF Adviser, Mr Bowerman said it is timely for the Financial System Inquiry to be evaluating the role of leveraging in superannuation.

The FSI panel is currently seeking feedback on restoring the general prohibition on direct leverage in superannuation on a prospective basis.

“The original structure of the superannuation market was that it was to be unleveraged it was not to be geared, with the idea that it would balance the banking system which obviously is leveraged,” Mr Bowerman said. “And so I think that’s a useful discussion for the Murray Inquiry to have.”

Mr Bowerman noted leveraging becomes particularly problematic with “fringe players” who are targeting SMSFs for property spruiking.

“The risk is where it’s not done with the assistance of a professional specialist adviser, it’s done by someone outside the advisory world. I think that’s… where you clearly get into a much, much higher risk profile in terms of what could happen to the SMSF.”

Vanguard ‘wary’ of leveraging in super
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