Powered by MOMENTUM MEDIA
realestatebusiness logo

Breaking news and updates daily. Subscribe to our Newsletter!

Home of the REB Top 100 Agents
Breaking news and updates daily. Subscribe to our newsletter

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

rpm logo latest

Shock at number of investors getting poor advice

By Sasha Karen
02 July 2018 | 1 minute read
poorrating850

A new ASIC report has found that a shocking number of SMSF property investors are subject to bad advice that could leave them “significantly” worse off in retirement.

The reports Improving the quality of advice and member experiences and Member experiences with self-managed superannuation funds saw ASIC select 250 client files at random. Out of this selection, 91 per cent did not align with the Corporations Act’s “best interests” duty and related obligations. This included poor record-keeping and process failures in 10 per cent of the files. An additional 10 per cent would have been “significantly worse off” when retiring due to the given advice.

ASIC deputy chair Peter Kell said that making decisions about super is one of the most important decisions a person can make, but there is little knowledge about them.

Advertisement
Advertisement

“ASIC found there is a lack of basic knowledge of the legal obligations in setting up or running an SMSF.”

Among many things, one finding by ASIC was that people were using SMSFs as a vehicle to enter the property market and were using it only to enter the property market without a wider investment strategy.

“For members who had seen property prices increase, particularly in Sydney and Melbourne, an SMSF became a vehicle to start investing in the property market. The surge in property prices created a sense of urgency driven by a fear of missing out,” the report noted.

An increasing usage of one-stop shops was also discovered in the report, where advisers have a relationship with developers or agents and recommend clients to invest into their products, typically geared residential property through an SMSF, regardless of the personal circumstance or the best interest of the client.

“The one-stop shop model creates inherent conflicts of interest that may affect the advice given to a client to set up an SMSF, make subsequent investments or use specific services. These conflicts can arise from direct or indirect commissions, referral payment arrangements, representative remuneration structures or even management pressures,” the report explained.

Peter Koulizos, chairman of the Property Investment Professionals of Australia, does not have a big problem with one-stop shops, but more so with the advice, as he believes no matter who the one-stop shop is, they need to do the best thing for the client.

In the end, the client needs to be number one, and then the paperwork that the people provide, they need to disclaim all conditions that they collect, and in my opinion, it is very, very hard to justify if a client is paying you a fee for the property investment advice and a developer is giving you a fee for selling one of their units. To me that is a classic conflict of interest,” Mr Koulizos told REB sister publication Smart Property Investment.

“If there is a dispute, who are you really representing? Are you really representing the client and might be giving you a few thousand dollars in fees, or are you really representing the developer who’s willing to give you tens of thousands of dollars in spotter’s fees or commission?

“People need to check their paperwork that shows exactly where this person’s getting their commission from.”

In order to address this, ASIC plans to work alongside other regulators, including the ATO and APRA, to reduce the biased advice given out from one-stop shops.

Mr Koulizos thinks these pairings are a “terrific” idea that he welcomes.

“I think the ATO needs to be involved, because they have a finger in the pie as far as SMSFs are concerned, and I think ASIC also needs to be involved in the provision of investment advice; it needs to be independent and there needs to be no conflict of interest.”

Shock at number of investors getting poor advice
poorrating850
lawyersweekly logo
Rankings
rankings
JUST RELEASED
May 09, 2022

REB Top 50 Women in Real Estate 2022

REB is thrilled to present the Top 50 Women in Real Estate 2022 ranking, which sets t ... LEARN MORE

rankings
JUST RELEASED
May 04, 2022

REB Top 100 Agents 2022

Now in its second decade, the REB Top 100 Agents 2022 rankings are the most revered s ... LEARN MORE

rankings
JUST RELEASED
May 02, 2022

REB Top 50 Agents NSW 2022

Even a pandemic has not put the brakes on the unstoppable property market in NSW, whi ... LEARN MORE

rankings
JUST RELEASED
April 27, 2022

REB Top 50 Agents VIC 2022

The COVID-19 crisis has not deterred the property market in Victoria, which has been ... LEARN MORE

rankings
JUST RELEASED
April 25, 2022

REB Top 50 Agents QLD 2022

As the property market continues to roar in Brisbane and Queensland, the REB Top 50 A ... LEARN MORE

Coming up

rankings rankings

 

Subscribe to our RPM
mailing list

 

Do you have an industry update?

top suburbs

12 month growth
Box Hill
127.02%
Mollymook
82.85%
Brightwaters
79.93%
Cleve
78.13%
Bawley Point
76.2%
Murrays Beach
75.57%
Terranora
70%
Crescent Head
69.38%
Park Ridge South
68.32%
Mollymook Beach
67.09%
SEE AREA REPORTS ON SMART PROPERTY INVESTMENT WEBSITE
Subscribe to Newsletter

Ensure you never miss an issue of the Real Estate Business Bulletin.
Enter your email to receive the latest real estate advice and tools to help you sell.