Spruik­ers to be reined in at long last

Midwest Times - - PERSONAL FINANCE - FI­NANCE MAT­TERS Rob Zam­mit Rob Zam­mit is the Prin­ci­pal Fi­nan­cial Ad­viser at RSM Fi­nan­cial Ser­vices.

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?

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