Heffron SMSF Solutions’ most recent “SMSF Borrowing Data Report” showed the majority of limited recourse borrowing arrangements (LRBA) had been advised by a financial adviser, with adviser involvement expected to grow.
The report showed that of the 1700 funds Heffron had administered for the financial year to date, 46 had an LRBA in place, with the majority of LRBA loans in relation to investment properties as opposed to commercial properties.
In addition, 86 per cent of LRBAs had been advised by a financial adviser.
“I would certainly expect it and like it to be closer to 100 per cent,” Heffron head of document services Duane Pinches told selfmanagedsuper.
“Despite it being around for seven years and being more understood by the advice community, it is obviously still open to abuse, like anything, though we’re certainly not seeing that, and it is still quite a complex structure.
“From what our report shows, advice is happening and growing so we’d like to see it higher, but I’d expect to see something on the regulatory front, which I think can only be a good thing.”
Pinches said the other 14 per cent of LRBAs had come through from an accountant as execution-only or, to a lesser degree, from the trustee directly, which could be a reflection of a related-party loan.
“In saying that, we just may have not seen that financial advice certificate from the 14 per cent so it may well be that they have received advice,” he said.
“So that [86 per cent] figure could be understated and advice was much higher than that.”
He said he expected a slight increase in total LRBAs this financial year for both Heffron administration funds and non-Heffron administration funds, compared to the 136 loans completed last financial year.
“It’s currently at 132, which is a year-to-date financial year figure, so we’ve still got a couple of months of information to go,” he said.
“We’d expect to put on another 15 to 20 LRBAs, off a growing base of funds under administration.
“The awareness of LRBAs is increasing amongst the planning community and what we are noticing when dealing with these transactions is that we’re getting more informed advisers and more informed trustees and clients coming through who understand the process – that’s natural because this has been around since 2007, so we’ve had a while to digest it.”
