ASIC and the ATO have repeatedly highlighted the dangers of buying property through a single organisation that handles all steps in the process, often referred to as “one-stop-shops.” These setups typically offer most or all of the following services for a new SMSF from one associated group:
Real Estate recommendation for a specific property and/or property rental management
Property Adviser who provides initial training or introduction to property investing, then directs you to associated service providers
Accounting and Audit services to set up and manage the administration of your new SMSF
Financial Planner to prepare a Statement of Advice on the suitability, risks, costs, and benefits of an SMSF, including benefits lost in transitioning to an SMSF
Conveyancer to handle the property transaction
Mortgage Broker to arrange the finance
One major issue is the lack of transparency about how these services are interconnected. Always ask each party about their fees and whether they pay any form of remuneration, referral commission charges, etc., to any other party.
In its recent Report 575 – SMSFs: Improving the quality of advice and member experiences, ASIC was very specific about their concerns. From the report:
SMSF property one-stop shops
397: “The use of property one-stop shops is an area of significant concern. These models tend to promote the purchase of geared residential property through an SMSF, arranged by groups of related real estate agents, developers, mortgage brokers, accountants, and financial advisers.
398: The one-stop shop model creates inherent conflicts of interest that may affect the advice given to a client to set up an SMSF, make subsequent investments, or use specific services. These conflicts can arise from direct or indirect commissions, referral payment arrangements, representative remuneration structures, or even management pressures.
399: We have previously achieved enforcement outcomes against operators of property one-stop shops involving SMSFs—such as Park Trent Properties Group Limited and Anne Street Partners. In light of the findings from this project, we will continue to conduct surveillance on these property one-stop shop operators and take enforcement action where appropriate.
400: We will also work with other regulators, including the ATO and APRA, to develop a holistic approach to addressing problems that we are seeing with property one-stop shops.”
Despite these warnings, ASIC’s further research has shown that people still value the idea of a one-stop-shop for their advice needs when buying property. This preference likely stems from a desire for simplicity and having someone manage the process. However, you can achieve this simplicity without the inherent dangers by choosing to work with professionals who charge a fee for their services and do not accept commissions or any remuneration from other parties, or who fully disclose such arrangements, like a Mortgage Broker remunerated by the lender.
When considering a property for your Self Managed Superannuation Fund (SMSF) or any asset, ensure that at least some of the service providers are working in your best interests. Financial Planners are legally obligated to act in their client’s best interest, but financial incentives can blur the lines. Don’t hesitate to ask questions about:
Who is providing you the advice
How they are being paid
Whether they receive any other form of remuneration
How they are connected to other service providers
It is crucial for your professional service providers to work on strategies on your behalf without paying fees to each other, which ultimately increases your costs. Here’s how I work with other professional service providers:
I do not provide specific advice on “the property” for you and stick to my area of expertise: whether an SMSF is right for you and how you can use it to achieve your goals. I charge a specific fee for this advice, outlined in a Letter of Engagement before you commit to my service. If you want ongoing advice, I explain it upfront in an Ongoing Service Agreement.
I offer a range of SMSF Admin and Audit solutions from other providers to suit your needs. I have 4-5 options to ensure you can choose what suits you with our guidance, often recommending you use your current Accountant. I do not receive any commission, fees, or other remuneration from these providers. I simply insist they take good care of my clients.
If you need help choosing a property, I have a number of trusted Buyer’s Agents across the country ready to provide advice. I do not receive any commission, fees, or other remuneration from these providers. I simply insist they take good care of my clients.
For finance arrangements, I refer you to brokers with experience and expertise in SMSF Lending. I do not receive any commission, fees, or other remuneration from these providers. I simply insist they take good care of my clients.
For legal advice or conveyancing, if you do not have a current lawyer or they lack SMSF experience, I refer clients to lawyers/conveyancers with specific expertise in SMSF property transactions, powers of attorney, and estate planning. I do not receive any commission, fees, or other remuneration from these providers. I simply insist they take good care of my clients.
Can you say the same about your service providers?
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