Property investment advice

We have noted recently that some industry commentators and consumer groups have been advising ACL holders to be wary about the kind of advice that they provide to their clients.

While these comments may be well intended, some of them have been factually incorrect.

Many broking businesses also offer consumers assistance and advice with the purchase of investment properties. This does, indeed, fall outside the authorisations of an Australian Credit Licence. Of course it does! Credit Licensees are authorised to do one of only three things:

  1. engage in credit activities as a credit provider (lender);
  2. engage in credit activities other than as a credit provider (everyone else); or
  3. both.

At the other end of what the federal regulators oversee is Australian Financial Services Licensing.  AFS licensing authorises licensees to provide services in relation to specific financial products.

And that’s important because, guess what – real estate is not a financial product! Give a consumer advice about investing in property and that is not financial advice.

But there are some other things to note about this type of advice:

  1. Some of the services we have seen in this space border on taxation advice – a service that is separately regulated;
  2. Some States and Territories have their own legislation about this type of advice; and
  3. There are industry bodies that attempt to quasi-regulate the industry.

So it’s not necessarily open slather and businesses providing these services need to be wary.  However, QED Risk Services main message here is that advice on property investment is not covered by ASIC regulations.

Is this a good situation?  Probably not.  To the average person in the street, advice of this type would ordinarily be considered to be “financial advice”.  But for the time being at least, it is patently untrue to say that brokers providing this type of advice are straying into “financial product advice”.

If you are unsure about your business activities in relation to federal regulations, don’t hesitate to contact QED Risk Services to discuss your needs.

  • Posted on: Sunday, 8 May, 2011

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