While writing a piece for the website Smart Company, Cara Waters sheds light on the Limited Recourse Borrowing Arrangements (LRBA) so often being used lately by SMSFs and certain guidelines that the SMSF Professionals’ Association of Australia (SPAA) has attached to them.
85% control of LBR lying with major banks
With approximately 85% control lying with them, the major banks of Australia have a great say in regards to the limited recourse borrowings. Keeping this in mind, NAB’s move to comply with the SPAA arrangements itself makes the verdict quite clear: there is no shying away from the SMSF guidelines now!
Best practice guidelines
The fresh SMSF guidelines are befitting, says Waters. The climate is just right for rouge dealers to do some really big harm to the economy; what with them cajoling SMSF trustees into inappropriate LRB arrangements. The guidelines, 1) LRBA lenders’ best practice guidelines and 2) LRBA advice best practice guidelines are only expected to bring in much required regulation into the lending environment of the SMSFs. It needs being suggested that the guidelines will be binding both for the lenders and the advisers.
Lack of prudential regulation in the SMSF space
Those who are targeting leverage might miss the LBRA boat from here on, but for those investors who are happy with decent levels of gearing, the SPAA can cater the goods. SMSF, for all the accolades it receives, remain a DIY strategy, and hence, it is not safeguarded by prudential regulation, like the large funds. The environment then becomes a cause of concern, trustees being susceptible against the schemes of rogue spruikers.
You can read the original article here.
Aren’t we hearing all these stories about property promoters persuading SMSF trustees to invest in real estate? Do we care to find if these same promoters are accredited to or licensed by the Australian Financial Service (AFS)? Put simply, are they even eligible to render financial advice?
SMSF is a new market and despite all the inroads it has made, it still remains vulnerable to a few delinquent players looking for their vested interests at the cost of hapless trustees. In absence of prudential regulation, the best practice guidelines will be quite a handful.