Real estate agents should tread warily when it comes to promoting self-managed super funds (SMSFs) as a reason to purchase property, a partner at an accountancy firm has said.
In a column in the November issue of Real Estate Business, Naomi Mitchell, partner at accountancy and advisory practice Younis and Co, said agents will need to become more educated around SMSFs with regulation likely to intensify.
“What this means is that real estate agents will need to become more educated – not just on the way that SMSFs can be used to purchase different property types, but also on the limitations, pitfalls and dangers surrounding this relatively new and complex investment avenue,” Ms Mitchell said.
Ms Mitchell’s comments come as more Australians create SMSFs, with Ms Mitchell pointing to Australian Taxation Office figures showing there were 840,000 members as of June 2011.
Ms Mitchell said agents were best advised to play it safe when it came to using SMSFs as a marketing tool to sell property.
“The safest approach for real estate agents is to refrain from actively and visibly marketing SMSFs as an investment option,” she said.
“An agent should never represent him, or herself to be capable of advising on SMSFs unless they are qualified to do so (for example, if they also happened to be a certified expert in the area).
“There are a number of important reasons for this, the most important of which is the negative legal and financial implications it can have on clients or prospects.
“Take, for example, an agent who advises a client that it is possible for them to purchase a property in their own name and transfer the property into an SMSF at a later date. The client might then go ahead and secure finance from a lender to purchase a residential property, believing that if they did encounter liquidity problems down the track, the property would be able to gain protection via transference into an SMSF.
"The reality of this scenario is that transferring the client’s property into an SMSF would be impossible, because SMSF laws preclude a super fund from buying residential property from a related party. Consequently, the investor would be left to devise some sort of short-term and long-term strategy for protecting their assets.
Ms Mitchell said this was just one of many examples where agents can potentially get into trouble.
“This is not to say that once an agent has a client or prospect in their office that they can’t inform the client or prospect that SMSFs can be a potential finance option for investors in particular circumstances; it simply means that an agent should not actively push the investment potential of SMSFs nor promote their own abilities – via marketing, advertising, PR, or direct pitching – to administer advice on the subject.”
She said agents could also benefit through referral relationships.
“While I’ve reasoned as to why real estate agents shouldn’t directly market or advise on SMSFs, there is considerable value in agents knowing how to pinpoint clients or prospects that may be suitable for the SMSF option – so that they can then refer these clients or prospects onto appropriately qualified advisers,” she said.