Self-managed super funds (SMSF) are the biggest growth area of the financial sector right now.
And as you’d expect, with money to be made in the complicated setup process, the predators are circling.
The prime area for exploitation is residential property and already ASIC is taking note.
A recent report by ASIC showed 28 per cent of SMSF advice was what they considered poor.
And most of that poorly rated advice related to investors setting up a SMSF and borrowing to buy property.
As ASIC Commissioner Peter Kell said, “we do not want to see SMSFs become the vehicle of choice for property spruikers.”
While ASIC has said they’ll be taking regulatory action on unlicensed advice and misleading marketing, as I’ve highlighted in the past, ASIC generally arrives at the crime scene after you’ve done your dough.
So once again it comes back to the investor keeping their wits about them.
Properly setting up a SMSF can be quite complex, even more so when it involves borrowing to buy property.
The property set-up can include the use of an accountant, financial planner, solicitor, lender and valuer.
While a lot of these jobs may be required for a regular property transaction, in the instance of a SMSF they also fill legal compliance roles, which if not adhered to can prove costly in the future.
Any good financial planner won’t sign off on a dubious investment strategy that isn’t in the investor’s best interests, no matter how much the investor wants it.
This is where the predators come in.
They will generally have all the required roles closely aligned; either in-house or easily referred and quickly signed off upon.
The process becomes very easy because there’s no independent third party and the ‘advice’ is already pre-determined and being property it’s usually not regulated.
Pre SMSF days, I saw some ghastly property spruiking deals involving huge debts on overvalued properties.
The ethics involved haven’t changed.
Free advice from the same people setting up the fund and selling the property? Run!
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543, www.mfg.com.au This information is general in nature and readers should seek professional advice specific to their circumstances. Wondering who to trust with your financial affairs? We ‘re one of six fiduciary financial planners in Australia.
