Spruikers to be reined in at long last
Mums and dads, the real DIY investors, have been the targets of property spruikers for years.
These investors have been easy targets for unlicensed advisers who operate in a market with limited regulation.
People have fallen victim to impressive sales tactics and been geared up to their eyeballs on a whim and a promise.
Yet they find out a decade later their dream investment property has reversed, in many instances, by 10-30 per cent as rents have plummeted.
Many are struggling to stay on top of repayments while some have faulted.
Spruikers have previously called themselves “financial planners”, a term which has only recently been enshrined in law.
This meant unregistered, unqualified individuals were able to portray themselves as financial advisers, recommending that investors purchase a property that was meant to change their life.
Investors felt they were getting honest and expert advice from a qualified financial adviser, “cough-cough”, spruiker.
Up until now, it has been a continual frustration of professionally qualified financial advisers to be tarnished with the same brush.
Regrettably, these spruikers have caused so much damage to the financial planning profession, and to those individuals who have been wrongfully advised.
A frustration for an underresourced regulator, the Australian Securities and Investment Commission, is the property sector has been outside its jurisdiction.
ASIC has not had the operating guidelines to go after the spruikers easily.
Spruikers have typically targeted cashed-up retirees and selfmanaged superannuation fund investors, offering lucrative returns on that Gold Coast unit or investment property in Karratha.
Fortunately, where there is pain, there is gain.
A change to the Corporations Act called best interest duty has given ASIC the powers it needs to target spruikers who focus on using SMSFs to purchase property.
Already, a number of recent cases focusing on best interest duty have been won by the corporate regulator.
Unfortunately, this may have come late for the thousands of investors who have fallen victim to spruikers.
A shadow shopping exercise of the SMSF sector in June showed a whopping 91 per cent of files reviewed by ASIC did not meet these best interest laws.
It is no doubt ASIC is sharpening its pencils, as finally it has the resources to reign in a sector clearly in need of significant reform, but how long will it take?