SMSF experts have again expressed their concerns over the lack of regulation surrounding advice given on limited recourse borrowing arrangements (LRBA) by practitioners, such as real estate agents and mortgage brokers.
“Real estate agents really at this point in time or mortgage brokers, because LRBAs aren’t considered a financial product, they don’t have to be licensed to talk about them, so that’s the danger about the whole situation,” NowInfinity principal Grant Abbott said at a recent selfmanagedsuper industry roundtable forum.
SMSF Professionals’ Association of Australia (SPAA) director of technical and professional standards Graeme Colley said attempts had been made to rectify the situation, but a definitive outcome did not appear to be forthcoming.
“We’ve been lobbying for changes in the corporations legislation so at least LRBAs would require licensed advice, but there have been two bites at the cherry there from the government and we haven’t heard anything for some time, so it’s hard to know whether anything will come out of that,” Colley said.
Abbott reiterated his concerns about the current state of play over LRBA advice.
“With real estate agents there are heaps of them out there telling people to set up SMSFs, they may not do it specifically and might just shift them over, but the fact that they’re making recommendations about SMSFs means they should be licensed,” he said.
In addition, he said the situation might well have been made worse due to the reduction in funding for the Australian Taxation Office and Australian Securities and Investments Commission (AISC) in this year’s federal budget.
“ASIC’s actually got a shrinking budget and the tax office has got a shrinking budget, so it’s a dangerous situation, and I’m sure the government’s worried about it, because if two or three of these things blow up, the whole industry gets pilloried,” he warned.
“It would give ammunition to other sectors, like the industry funds, to say ‘well look at these guys ripping off and rorting the system’.
“We’re hearing a lot of that anyway, which is not good.”
Phoenix Private Wealth Management director Andrew Chan said the whole process required greater transparency.
