Buyer’s agents told to curb unwanted financial advice

According to REBAA president Melinda Jennison, there was particular concern about property investment recommendations that included ownership structures such as trusts, companies, or self-managed super funds (SMSFs).

She argued property advice and financial advice were not the same thing, and that a buyer’s agent’s role was to advise on the property itself, not to recommend the ownership structure through which it should be acquired.

“In the case of SMSFs, this is particularly important because advice about using an SMSF to acquire property may require an Australian financial services licence,” she said.

She added that when it came to ownership structures, consumers should seek advice from qualified professional advisers.

“It is one thing to explain a property scenario or work through property-related numbers based on information provided by the client or their professional advisers.

“It is another thing entirely to recommend that a property should be acquired through a trust, company or SMSF, or to present modelling in a way that steers a consumer towards one of those structures.”

Jennison said the issue had been exacerbated by social-media-led marketing funnels that gave consumers the impression they were receiving investment guidance from a licensed advisor.

She said when engaging with these channels or seeking guidance from advisers, consumers should be wary of language describing property investing as “easy”, “low risk”, or “guaranteed”.

She added that when unqualified or unlicensed operators moved into areas beyond their scope, buyers missed out on the protections afforded by disclosure obligations, conduct standards, and redress pathways.

Jennison said questions about ownership structure should be addressed with the support of appropriately qualified professional advisers, such as an accountant or lawyer, and, where required, an appropriately licensed financial adviser.

As a result of the growing issue, REBAA said it was encouraging home buyers and investors to ask clear questions before engaging any adviser or property professional.

It said the questions included whether the advisor would be making recommendations for an ownership structure, whether they were licensed to provide financial advice, and whether they were being paid by anyone else.

“If consumers ever feel unsure, they should ask questions early. There is absolutely no downside in seeking clarity before making a major financial decision,” Jennison concluded.