PICA Chair Ben Kingsley, in a detailed communication, highlighted that these practices not only infringe on the Corporations Act but also place naive investors at significant risk. More troubling is how they undercut licensed advisers obligated to act in their clients' best interests.
According to Phil Anderson from the Financial Advice Association of Australia (FAAA), complaints about unauthorised SMSF recommendations routinely surface, prompting the FAAA to forward instances of evident misconduct to the Australian Securities and Investments Commission (ASIC). Social media is also seen as a catalyst in amplifying these risky practices, disseminating "get rich quick" messages to unsuspecting consumers.
Feedback from industry professionals echo this sentiment. Reports recount encounters where real estate agents and mortgage brokers, unlicensed in financial product advice, suggest SMSFs despite questionable suitability. In one instance, an adviser described a young couple who were ill-advisedly urged to establish an SMSF against professional advice due to potential financial pitfalls given their situation.
ASIC guidelines clearly state that any consultation involving financial strategies, including gearing and SMSFs, falls under financial product advice, necessitating appropriate licensing—a boundary these professionals are crossing.
PICA is advocating for advisers to maintain vigilance, scrutinise clients’ motivations behind such investment vehicles, and remind investors of the substantial risks associated with these heavily marketed options. Kingsley warns of the perils when investment advice is sourced from property groups rather than licensed advisers, urging financial planners to be cautious when alerted to such influences.
Reflecting concerns, Kingsley notes that his own advice firm has been approached multiple times with requests to set up trusts for property investments—offers he has prudently declined each time.
