GEM Capital adviser Mark Draper says there’s been a huge increase in the number of property spruikers approaching his practice in the last 12 months.
About three different property spruikers will contact the firm every week in an attempt to flog property to their clients.
“They’re offering 5 to 10 per cent commissions, which should be ringing alarm bells [to any adviser],” Mr Draper said.
The increase in property spruiker activity is likely driven by the growth in property values, low interest rates and the growing amount of money sitting in SMSFs, he said.
“They’re seeing that as an opportunity. There’s a lot of money out there looking for a home and these guys are out there trying to get [that money] so [practitioners] and trustees need to be careful of that.
“I just think there are few more warning signs at the moment … in the property sector – that’s where I’m seeing the most risk.”
Mr Draper added that there has also been an increase in the number of risky unlisted property trusts with high gearing being promoted.
The increasing risk of property spruikers has also been identified by PI insurers, with insurers scrutinising financial planning firms providing direct property advice.
“I think the PI insurers are ahead of the curb. They’re seeing where the hot spots are,” he said.
Property advisers should be made pay for the claims they make. If they state in their advice the property will be worh x and it does not make it they should pay the difference.
But it’s the road to riches, and if you buy 10 properties then you will have diversification. This is an absolute disgrace and decent advisers would be hauled over the coals using the same practices. 5-10% commission is right and on top of stamp duty it’s not hard to see how the unsuspecting ‘investor’ is behind the 8 ball from the start.