Providing Financial Advice…or not?

A topic of concern for many agents is when do you over-step your boundaries when discussing an investment in property? Unfortunately, by using the term investment you are already in unclear waters. Add the words self-managed superannuation and you are officially in hot water!

It is not uncommon to hear the words “Purchasing a property is the biggest investment most people make in their life time.” The job of a real estate agent is to sell a person the biggest investment they will make in their life.

A real estate agent is not permitted to give financial investment advice.
So you ask….where does the agent fit then if they sell the biggest investment most people will ever buy but cannot advise on investments?

The Australian Securities and Investment Commission (ASIC) are the body who regulate who can and cannot give financial and investment advice and the short answer you can get is, that unless you are covered by an Australian Financial Services Licence (AFSL) you cannot give advice on investments.

An AFSL can permit you to provide advice on insurance products, superannuation products, self-managed superfunds and managed investments to name a few permitted products. However, property as real estate agents understand it, does not constitute a “financial product” ……as yet.

What this essentially means is that you, as the agent, can sell property. However should you start considering to mix property with another form of financial product, like self-managed super funds, you are then getting yourself into troublesome territory.
Yes we understand that a great way for some people to purchase or “invest” in property is to do so through a self-managed super fund setup. However as an agent without the coverage of an AFSL, you are not allowed to discuss or advise this structure as an option to potential purchasers.

One must consider that any advice regarding how to invest and how to structure the finances to enable a purchaser to invest must come from a person who has the correct knowledge and skills in that area, which is currently at a minimum, the Diploma in Financial Planning, plus some additional product specific training for compliance.

Self-managed superfunds are so in-depth that someone that has their qualifications to advise in Superannuation cannot advise in selfmanaged superfunds unless they upskill into the Advanced Diploma level for that specific product.

The New South Wales Supreme Court has made a judgement in recent time about this exact issue, against a real estate agency that had been advising their purchasers on how to purchase property through a self-managed super fund when they did not have the AFSL coverage that they required to be able to provide that advice.

The short answer to this long question is, if you are not a financial planner, do not talk about Self-Managed Superannuation Funds to your potential purchasers. Refer them to someone who holds the right qualifications and gain a referral source at the same time!

‘Til next time,
Wishing you every success in your business ventures,
Rosy Sullivan

Leave a Reply