Although the proposal is not yet finalised, Nationals Senator John Williams told SMSF Adviser the inquiry should, among other things, look into the extent of regulation and oversight of the property investment industry and the extent of investment in this sector through SMSFs.
Further, it should look at the qualifications and accreditation currently required to provide proper and qualified advice to potential investors, and any scope for tightening these qualifications.
Mr Williams expressed concern about the lack of regulatory oversight for property investment advisers.
“I can go to my hometown tomorrow, hang a sign out the front that says ‘John Williams, property investment adviser’. I don’t need do any study, I don’t need any experience, I don’t need any licence, I have no oversight of me – that is wrong,” Mr Williams said.
“And I bet you if I was to do that, I would advise people to invest in a property that just happens to return me the greatest commission,” he added.
Mr Williams floated the idea of ASIC having regulatory oversight of advisers on property investment.
“ASIC has done a good job when it comes to financial planning regulations here, obviously, and I think they need powers to clamp down on property spruikers,” he said.
The property investment advisory industry has compliant and cowboy proponents. This can be said for most industries, particularly those related to the real estate industry. But, there is no real oversight function which is missing.
The reason? the very high commissions per sale, and the cut throat salesmanship that is endorsed. Promotion of investment in real estate should be captured by the financial planning fraternity. But, even more significantly, where this is done through SMSFs. Accountants are now required to be licensed to open and maintain SMSFs, perhaps the Real Estate industry should follow suit.
The problem, as I see it, is the exposure of that SMSF into one asset, in one asset class. Spreading the investment over a number of assets reduces risk and exposure. This is exactly the case for managed funds, and should be applied not just to equities, but property as well.
Way too late, damage done.
The property market is just like the share market there are worthy properties and worthless (DUD) properties.
Guess which one’s pay the big incentives (commissions).
The best part about the share market is the fact you can invest in a number of shares and this has been one of the major problems holding residential property back.
Most people would be better of by owning quality residential property focusing on the growth and value and less on the tax benefits.
This is long overdue and many people will be lamenting their rash decision to purchase guided by a ‘spruker’ with a cashflow projection.
Let’s put the property ‘Advisory’ industry under the same microscope as the Financial Planning process and see where it goes.
I agree with some of Peter Kellys comments. The inquiry should go beyond this in the terms of reference.
I think that Senator Williams is on the right track here.
Applying some of the principles to property investment, that apply to other asset classes; like best interest, fee disclosure, and being accountable for recommendations made, would be most worthy.
However, my fear is that no matter what the urgency, an enquiry followed by changes to the law (if deemed necessary), will take years before anything is implemented.
The cynic in me suggests that even if an enquiry is initiated, the more unscrupulous players in the property space will simply “make hay while the sun shines”. They will accelerate their activities to sell as many properties while they can, and then gracefully drift into the sunset if and when the ground rules change.
In the meantime, how many unsuspecting “investors” will be burnt, paying too much for potentially overpriced properties they can ill afford?