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While an increasing number of brokers are looking to add self-managed super fund products to their proposition, financial advisers are dubious of unskilled brokers flooding the market.
The Mortgage & Finance Association of Australia's (MFAA’s) recently launched its SMSF lending accreditation training program with 130 brokers already signing up, highlighting the increased appetite for the products.
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But a financial planner who spoke to The Adviser warned brokers to be wary of the risks when recommending SMSF products to their clients.
“Borrowing arrangements in super are complex and there are serious consequences for getting it wrong,” said Dacian Moses, director of Waterfall Way Associates Financial Planners.
Mr Moses said brokers with the right training and product knowledge could add value to their clients “My initial impression of the MFAA announcement was, and still is, basically positive … more broker training for this type of lending can only be a good thing.”
However Mr Moses was concerned about the scenario where brokers were operating as part of a larger scheme which involved selling property to SMSF investors.
“A promoter puts on property seminars to illustrate the financial benefits of a [limited recourse borrowing arrangement] LRBA in super. Investors can have an SMSF created for them on the spot, purchase the property from a related party, have the conveyance done by another related party and the broker provides the finance," he said.
“All the investor has to do is say that they want a self-managed superannuation fund and they do not want any advice.”
The problem with this scenario, Mr Moses said, was that the industry will tend to have unsophisticated people setting up a legal structure that they have little understanding of.
“They will be accessing an expensive form of finance. LRBAs are almost always more expensive than property investment loans, they will be purchasing overpriced property and funding a great deal of related party commission payments," he said.
