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.”
Once again the opportunists get away with thousands and a strong and valuable strategy gets considered as bad for investment. What needs to happen and happen fast is to regulate these idiots that are doing the property spruiking. I recently had a client contact me about a seminar he had attended and he was going to start an SMSF and invest in a resi property that these guys had shown him and quoted 10% as the investment future for the property. Luckily he contacted me first. The property was grossly overpriced and the fees for set up of the fund only was $3600. This was a blatant ‘No Advice’ hard sell and he backed off when I showed him the results in a more stable market etc. Unfortunately there are a number of their friends that did sign up.
So once again we have a recommendation to ban a system because of the “fringe players” who are abusing the system. So the vast majority of fine upstanding citizens cannot do something because of a small handful of “fringe dwellers” – talk about a nanny state – it is getting worse.