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Keep LRBAs for small business owners, CEO says
The proposal to ban limited recourse borrowing in SMSFs by the FSI Report will be a positive step for the SMSF industry overall but should be retained for the purchase of commercial property, says the chief executive of a Melbourne-based advice firm.
Speaking to SMSF Adviser, chief executive of JBS Financial Strategists Jenny Brown said the FSI Report’s suggestion to ban limited recourse borrowing arrangements (LBRAs) in SMSFs is a good thing for the industry as it will reduce the number of property spruikers.
“Property spruiking has been really detrimental to our industry and could potentially blow up if the property sector continues to give incorrect advice to set up SMSFs,” said Ms Brown.
Ms Brown argued that the use of LBRAs for the purchase of commercial property for business owners should be retained however.
“For business owners buying the business premises they are working out of, I think it’s a great strategy and should be allowed,” said Ms Brown.
She also argued the government should be looking at imposing greater regulation on the property sector in line with what financial advisers comply with.
“I’d like to see property spruikers having the same regulations as we do as financial advisers; the [property sector] needs to be a lot more highly regulated and I think that’s what’s causing our issues,” she said.
Ms Brown said she’d like to see regulation around the qualifications and rules required to sell property.
“I don’t see why someone can sell a million-dollar property when all they have is a real estate’s licence whereas an adviser putting together a million-dollar portfolio must go through the full compliance, know the client, know the product, get everything signed off, put together a full financial plan and do regular reviews,” said Ms Brown.
The real estate side of the sector Ms Brown said was currently the biggest issue facing the financial services industry.
“Clean that part of the industry up and I think we’re in really good shape,” said Ms Brown.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
Hi Bob, KCA has responded well. Don't get me wrong, I am concerned with people acquiring investments (whether property or shares or FX) where they have little appreciation of the true facts. I would love to see property with SMSF be a regulated investment asset needing expert advise from a Qualified Property Investment Adviser - such as one through PIPA or similar organisation. Not all property advisers are spuikers?? Address this issue not abandon the investment option all together as this has significant other ramifications.0- So sad to see how many people are so easily prepared to give away others people's rights to invest their OWN money in the asset class of their choice.
There are legitimate concerns about property spruikers but surely the fair response is to reform the system so borrowing can be done safely and conservatively and designed to remove the incentives for spruikers to get involved. Not a very intellectually lazy "just ban it" response.0 - Peter you are missing Ms Browns point, where will a Real Estate Agent be when the property market corrects and who will the client blame for poor investment advice? I went through the property spruiking issues emanating out of the Gold Coast many years ago and as an adviser had to try to salvage the mess these greedy people had inflicted on unsuspecting clients. The Real Estate Agents were long gone, took the money and ran with no responsibility. It is BS to suggest that Real Estate Agents don't need to be regulated as are financial advisers.0
- Strongly agree with Jenny's comments, removing this avenue for small business to acquire business freehold is to be avoided at all costs. Limit LRBA's to business real property, this is not an area of the property market that is distorted by the actions of property promoters.0
- It is an interesting point that LRBA is not really the issue based on your comments, the issue is that property market is unregulated. Why punish people diversifying into property through SMSF by blocking lending. Let's go back to why it was brought in, because the way things where going Superannuation was threatening to have over exposure in Equity Markets which would over inflate that arena.0
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