A non-major bank has stated it sees the lack of regulated advice in the real estate sector as one of the â€œdriving factorsâ€ behind consumers establishing SMSFs that are not appropriate for their circumstances.
In its submission to the Senate economics standing committe’s Inquiry into the Provisions of the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, Bank of Queensland recommended the provision of advice on the purchase of property, other than for owner occupiers, be included in the definition of financial advice.
â€œReal estate purchases by consumers represent significant investments of wealth and almost always involve some element of debt. It is an anomaly that advice provided on such significant investment decisions is not regulated in the same way as advice on similarly significant investments,â€ the submission stated.
â€œThere is no valid reason for the financial services licensing system not to apply to advice with respect to real estate investments. Inclusion of real estate advice would provide a consistent framework for advice standards across all major asset classes.â€
BoQ also believes that the lack of regulated advice in the real estate sector is a factor that contributes to investors’ establishing SMSFs which are not appropriate for their circumstances.
For example, those consumers might have a fund that is â€œtoo small to be economicâ€ or could be an inappropriate trustee candidate, BoQ stated.
â€œItâ€™s very encouraging that a bank who profits from lending money has the courage to speak up about regulating the property investment industry,â€ PIPA chair Ben Kingsley toldSMSF Adviser.
â€œIf direct property investment was regulated, we would see less wild investment return claims from some spruikers and a more sensible and mature property investment industry which can only lead to consumers’ making better decisions about whether, on balance, buying property in an SMSF is the right decision for them.â€