In its submission to the Senate economics standing committe’s Inquiry into the Provisions of the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, Bank of Queensland 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.”
BoQ also believes that the lack of regulated advice in the real estate sector is a factor that contributes to investors’ establishing SMSFs which are not appropriate for their circumstances.
For example, those consumers might have a fund that is “too small to be economic” or could be an inappropriate trustee candidate, BoQ stated.
The Property Investment Professionals’ Association of Australia (PIPA) has long argued that if property is being purchased for investment purposes, it should be considered a financial product.
“It’s very encouraging that a bank who profits from lending money has the courage to speak up about regulating the property investment industry,” PIPA chair Ben Kingsley told SMSF Adviser.
“If direct property investment was regulated, we would see less wild investment return claims from some spruikers and a more sensible and mature property investment industry which can only lead to consumers’ making better decisions about whether, on balance, buying property in an SMSF is the right decision for them.”
So now the vast majority of people who are capable of sensibly buying investment properties without this “helpful” advice will have to get a full financial plan and statement of advice for $2K – $3K to do something they are already quite capable of. In fact many of them may have successfully done this multiple times before.
What is it with this “oh my God there’s something over there that hasn’t been regulated, quick get it regulated and forced the vast majority of sensible people to pay money for no good reason” mentality.
Property investment advice and real estate need to be separated completely to support the provision of sustainable and balanced property investment advice for SMSF trustees or Mum and Dad investors. Real estate law and the business convention supports exaggerated claims for the vendor’s benefit and they have no place in a considered investment in property for a financial return in the client’s best interests.
lord Stockton
You are missing the point, R/Es are openly flogging an investment into an investment product. Regardless of the buyer/seller focus- they are “””giving”””advice and certainly either end of the contract is not their focus–its $$$$$$s
One issue about real estate that usually doesn’t apply with other investments is the fact that real estate agent is acting for the vendor -not the buyer. The agent has limited responsibilty to the purchaser.
Compare this with the concepts of ‘independent’ advice or ‘client best interest’ for say shares, managed funds etc when a FP speaks with a client
So true! And really concerning when real estate agents try to sell SMSFs.
worth a read
I couldn’t agree more. I for one an sick and tired of having to clean up the mess caused by REalest Agents and Mortgage Brokers giving this advice and legal advice and when it all goes Pear shape, we have to clean up the mess, deal with a shitty client who is not impresssed to the cost to rectify a problem that could be avoided. Congratualtions to B of Q for raising this issue.
Great to see a bank affirm what many advisers have stated regularly over the last 12 months or more. Wonder if anyone takes notice and brings legislation into play