The Australian Securities and Investments Commission (ASIC) has warned the real estate industry that agents must be appropriately licensed before recommending investors use a self-managed superannuation fund (SMSF) to invest in property.
ASIC has written to the Real Estate Institute of Australia (REIA), the state and territory real estate institutes and property investment associations setting out their concerns and asking them to communicate them with their members.
ASIC said it was concerned that with the increased popularity of SMSFs and property investments, real estate agents may not realise they are providing financial product advice and that they need an Australian financial services licence (AFSL) to make recommendations or statements about these products.
ASIC commissioner Greg Tanzer said ASIC’s role in relation to SMSFs was to regulate the gatekeepers – the advice providers, SMSF auditors, and providers of products and services to SMSFs.
“We want to ensure the SMSF sector remains healthy and vibrant so investors can be confident that, if they are receiving advice about investing through an SMSF, their adviser holds an Australian financial services licence and is aware of its obligations,” Mr Tanzer said.
ASIC also said it was aware some real estate agents were offering commissions or benefits to financial advisers for recommending investors use an SMSF to purchase the real estate agents’ properties.
Such commissions or benefits may be conflicted remuneration, and financial advisers could be banned from receiving them under the Future of Financial Advice (FOFA) reforms.
CEO of REIA Amanda Lynch told Real Estate Business the institute had been working closely with ASIC on the issue.
“We believe education is an important part of informing agents about their obligations and in terms of any advice on self-managed super funds, it’s imperative that only licensed financial advisers provide this advice," she said.
“There have been cases where agents have crossed the line, inadvertently probably, and we are very keen to work with ASIC on developing some tools. We are looking at developing some guidelines to inform agents on this very important issue."
Ms Lynch said the ASIC warning was another example of the importance of CPD (continuing professional development), which will be scrapped under National Occupational Licensing Authority’s proposals.
“Compulsory CPD is the perfect vehicle to inform agents about their rights and responsibilities.”
In a statement, SMSF Professionals’ Association of Australia (SPAA) said it fully supported ASIC’s warning.
CEO Andrea Slattery said: “From SPAA’s perspective, it’s been our constant stance on SMSFs investing in property that there are technical dangers, and as such we have always recommended that trustees get professional licensed advice, either from a professional SMSF Advisor who holds a licence or is an authorised representative of a licensee."