John Williams (NSW, National Party) Share this | Link to this | Hansard source

I rise tonight to speak about what I consider to be a big problem here in our country. I want to focus on the property investment industry. The property investment industry involves giving advice to potential property investors, which may include: advice relating to their personal circumstances, advice about what property to buy, and advice about the tax and borrowing structure to employ. It is an unregulated industry. You do not need to be licensed, qualified or educated to be a property investment advisor. There is no requirement to indicate what commissions are received. The growing popularity of property investment via self-managed super funds makes this even more alarming, with poor investment decisions putting the retirement of potentially millions of Australians at risk.

ABS data shows that financing for property investment purposes has accounted for as much as 40 per cent of all housing finance activity. Self-managed super funds are the fastest growing segment of Australian superannuation. As of June 2013 self-managed super funds held around $500 billion worth of assets, almost one-third of the $1.6 trillion superannuation industry total assets at that time

According to the Reserve Bank of Australia, this compares to just a nine per cent portion of the industry's assets in 1995. The number of self-managed super fund member accounts has also doubled over the past decade.

In September 2007, changes were made to super legislation which allowed self-managed super funds to borrow money to purchase assets under limited recourse conditions. With more than two thirds of Australians purchasing at least one property and because it is often the highest-value asset a household possesses, a lack of regulation is hard to comprehend. As noted by the Reserve Bank in its September 2013 Financial Stability Review, promotion of self-managed superannuation funds including their use for geared property investment has increased in recent times and the central bank has flagged its intentions to keep a close eye on this market. It believes it represents a vehicle for potentially speculative demand for property which has not existed in the past.

In July 2010 the federal government welcomed the final report of the Review into the Governance, Efficiency, Structure and Operation of Australia's Superannuation System—the Cooper review. This report found that the self-managed super fund system is largely successful and well-functioning. While significant changes are not required, it noted that there are still a number of noticeable issues which, for the most part, do not directly relate to trustees and members but rather service providers and the wider regulatory framework. The report found that trustees are often dependent on service providers whose current minimum standards of self-managed super fund knowledge are inadequate and that the level and quality of information available is inadequate given its significance. With more than two-thirds of Australians purchasing at least one property, and it often being the highest-value asset a household possesses, the lack of regulation is unbelievable. This is what worries me—mum and dad investors use the equity that they have built up in their family home to make property investment purchases.

How do you become a property investment adviser? It is simple. I will give you an example: I retire and walk out of the Senate. I open an office and I put a sign up, 'John Williams, property investment adviser. 'I have no education, no experience, no licence is required, there is no regulatory control over what I do. The scary thing is that someone might say, 'I am about to develop 200 units, John Williams—for every person you tell to invest in my development and they buy a unit I will give you $40,000.' For example, Senator Ketter walks into my office and says, 'Look, I want to buy an investment property, I have a self-managed super fund, what can you advise me on?' 'Oh, Senator Ketter, I have just the thing for you—200 units are being built here with water views, there is a $200,000 deposit and they are $700,000 each—buy one of them.' I have no history of giving advice, I have no education, there is no regulation over me, there is no licence for me to have, there is no regulation to say how much upkeep of my knowledge in the industry I have to do; I just push them into the investment and I get a big kickback from the developer. This is crazy. We have been through financial planning problems, and I can see a Senate inquiry coming up soon to look at this very important issue of property investment advice and make sure this issue is addressed and that people do not get the wrong advice and do not gamble with their savings or their self-managed super funds. It is unacceptable that there are no requirements to be a property investment adviser. The Senate Economics References Committee has to have a good look at this to sort this industry out.