While the number of those looking to invest in property through their SMSF is growing, it has recently come to light that residential property investors must be extra wary about the advice they're receiving.
In a speech to the Chartered Public Accountants conference yesterday, ASIC Commissioner Peter Kell noted that very few investors received ‘good’ advice surrounding real property SMSF investing.
Speaking of a taskforce launched in September into the advice given by various financial industries to SMSF trustees, Mr Kell explained that this was partly due to an increasing number of less scrupulous operators targeting SMSFs.
“As its first major task, we have been looking closely at the advice provided around SMSFs, and particularly looking at whether only appropriate clients have been advised to establish an SMSF, and whether they have received good quality advice services where a fund is established,” he said.
“We have also looked especially at lower balance SMSFs and advice provided to those with less than $150,000 held in their SMSF.”
Having reviewed over 100 files relating to an SMSF, he noted a majority had a fund balance of $150,000 or less, and either some or all had either older members, members with lower incomes, SMSFs where there was borrowing or single-asset class/less diversified allocation. These would be trustees with higher risk profiles.
The advice was then rated as ‘good’, ‘adequate’ or ‘poor’ and “overall, we concluded a majority of investors in the sample received ‘adequate’ advice – relatively few received ‘good’ advice – but while a majority received adequate advice, there were concerning pockets of ‘poor’ advice, and much of this advice concerned recommendations to set up an SMSF in order to gear into real property”.
Later, Mr Kell told Smart Property Investment’s sister publication, ifa, that he has significant concerns about ‘aggressive’ marketing campaigns targeting investors, particularly surrounding direct property investment.
“We will be cracking down on dodgy property spruikers who seem to think SMSFs are the new vehicle through which they can push their operations,” he said.
“We remind operators that they have to be licensed in order to provide advice around investing in property through an SMSF. We have concerns about whether some of the advice going on is unlicensed and to be frank, some of the claims we are seeing [in advertising materials] are too good to be true.
“We don’t want SMSFs to be the vehicle of dodgy property investment operators. ASIC will be looking closely at this area – both the advice offered and the marketing materials supporting that advice.”
Investors are reminded to always seek advice, and to undertake their due diligence on both the expert giving the advice and the asset being suggested.