Ex-Suncorp manager warned SMSFA of credit ‘risks’
EXCLUSIVE An SMSF specialist and former Suncorp manager warned the SMSFA of risks in the SMSF lending sector in an attempt to raise education and accreditation standards.
Mark Kevin, managing director of Mortgage Advice Bureau (MAB) Sydney, has about 20 applications for SMSF loans sitting on his desk. At a time when rates are rising and lenders are tightening their credit standards, the demand for SMSF loans is red hot.
“We were seeing strong volumes of residential mortgage settlements going through our office up until January. Borrowers are jittery now and the banks have really ramped up their serviceability checks,” Mr Kevin told SMSF Adviser.
“But we are writing an enormous amount of SMSF loans. That’s largely what we have been doing for the past two months.”
SMSF lending has been a niche Mr Kevin has focused on since he started in mortgage broking in late 2020.
Prior to that, he spent almost a decade at Suncorp in senior leadership positions across financial advice, superannuation, insurance and SMSFs.
“My first job in finance was working with The Strategist Group under SMSF veteran Grant Abbott,” Mr Kevin said. “Since then, I have always had a soft spot for the SMSF space,” he said.
“I knew that there wasn’t as much collaboration happening between accountants, financial advisers and brokers as there should be. Brokers are somewhat looked down on by other professionals and I wanted to change that by bringing a higher level of professionalism and service offer.”
Mr Kevin aggregates through AFG and has access to nine SMSF lenders, one of the widest SMSF lender panels available. He says that while the major banks exited this space around 2016–2018, in recent years there has been a surge in new SMSF credit products from non-bank lenders.
In a win for consumers, this increased competition has put downward pressure on fees and rates.
“We are pushing the lenders to innovate and want them to go digital with their processes. It is still very paper based and cumbersome,” he said.
In 2021 Mr Kevin authored a strategy paper around increasing professionalism, education and standards in the SMSF credit space. He lobbied the SMSFA and met with senior executives in a bid to bring a specialist broker accreditation to market, which would have recognised brokers who had the background, training and expertise to work in what is a more complex lending niche.
His efforts proved futile.
“Mortgage broking is moving towards professionalism and having higher standards around SMSF lending should be an important part of that. Financial advisers had their FOFA moment and brokers are going through it now,” he said.
“The barrier to entry in this space is too low. At the moment a broker can do a few weeks of training and get accredited with lenders to provide credit advice to someone about making a large and complex investment property purchase with their retirement funds. That’s a risk.”
Mr Kevin, who describes the current accreditation process as “incredibly light touch” says he sees a significant level of risk to aggregators and lenders. However, there is a reluctance among SMSF lenders to narrow their distribution channel.
In his strategy paper, Mr Kevin outlines the strategic intent of the “SMSF Specialist Accredited Broker.” This includes lifting the level of professionalism in the mortgage broking industry by recognising that certain areas of mortgage lending are more complex and require knowledge, skills, and qualifications beyond the industries current minimum education standards and accreditations.
He would like to see SMSF accredited brokers aligned with financial planning and accounting professionals and recognised for this with a specialist designation.
Critically, he believes more aggregators and lenders should be willing to reduce risk by increasing the competency of mortgage brokers advising on SMSF loans.