Planners facing a new super hurdle
Financial planners have been confronted with a new superannuation dilemma, with Sydney tax accountant Gatherum Goss and Associates having received legal advice that its property instalment warrant is a mortgage product as opposed to a financial product.
The instalment warrant, which was released on March 1, is one of a number of new residential products targeted at the self-managed super fund (SMSF) market in accordance with the new legislation allowing gearing in SMSFs.
Gatherum Goss head Pat Mannix said the legal advice from a commercial legal adviser last week means it does not need to acquire an Australian Financial Services Licence to sell its instalment warrant.
“Essentially, the advice means we as an organisation don’t have to employ a licensed financial adviser to sell our product, or write up a Statement of Advice (SOA) for it,” he said.
“As long as we don’t advise clients as to which residential or commercial property to buy, and the client decides to purchase the property in their SMSF, we will be able to prepare the documentation for the warrant.”
Mannix cautioned that the legal advice was specific to its own property instalment warrant, which was released onto the market last week, based on its internal structure as a product.
“The advice we’ve received is based on us having a third party, Perpetual Trustees, which holds a bear trust for the product, and then we also have a third party lender, which would be one of the banks.”
The advice is likely to contribute to ongoing industry debate on whether gearing in super should be allowed, although Mannix himself would not comment on any of the potential implications of the advice.
“I think everyone needs to get their own legal advice, because the relevant legislation (of September last year) has been drafted fairly loosely in terms of product structure.
“It doesn’t specifically say there has to be a third-party bear trust, although it does say there has to be a third-party bank and that the product has to use the term ‘instalment warrant’.”
However, Mannix said that if property instalment warrants in general are deemed not to be financial products they are “certainly not going to be as attractive to financial planners unless they advise their clients to buy a property offered by a developer”.
“If they lend in with a developer and can sell one of their properties to a client via a property warrant (which would include providing a SOA), then they’ll get a commission.”
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