Real estate agents warned against giving financial advice

ASIC has warned the real estate industry that agents recommending investors use a self-managed superannuation fund (SMSF) to invest in property must ensure they are appropriately licensed to provide the advice.

ASIC is concerned that with the increased popularity of SMSFs and property investment, real estate agents may not realise they are providing financial product advice and need an Australian financial services (AFS) licence when making recommendations or statements of opinion to a person to use an SMSF to invest in property.

This does not prevent real estate agents from providing factual information to consumers in relation to SMSFs. Just make sure you don’t “cross the line” and give a recommendation or a statement of opinion to a person to set up an SMSF or use an existing SMSF to purchase real property through that SMSF.

If real estate agents are providing advice rather than factual information, they may be carrying on an unlicensed financial services business in contravention of the Corporations Act. The Corporations Act provides that a person convicted of carrying on an unlicensed financial services business may be subject to a fine of up to $34,000 or imprisonment for 2 years or both. If a company is convicted it may be liable to penalties, including a fine of up to $170,000.

Baker Love is a member of the SMSF Professionals Association Member. Contact one of our team if you would like further information about this matter, including specific advices as to the difference between factual information and financial product advice.



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