A prominent consumer finance commentator has said regulators should focus more on extending regulation to cover property spruikers rather than adding more layers of red tape to already regulated industries.
Lisa Montgomery, who previously headed up Resi Mortgage Corporation before becoming an independent personal finance consultant, said there needs to be a balance so that all sectors are regulated evenly and consistently for the good of both the consumer and the broader economy.
“I think regulation adds a level of professionalism to an industry, and it’s something we can always quote and talk about if need be to our clients,” she said.
“But you look at the property investment industry, from a professional standards perspective: if I wanted to tomorrow, I could set up a website, call a seminar, get involved with a developer and pocket loads of money in my back pocket from unsuspecting investors. But I don’t need to meet professional standards to do that and position myself as an expert.”
Ms Montgomery said that the recent property boom in Sydney and Melbourne has once again helped to highlight the issue, and at last regulators seem to be taking notice.
“I am not saying that anybody who goes out talking about property and investing [is] a crook – we’re talking about people taking advantage of that fear of missing out and time-poor individuals who want to invest. There are some absolutely fantastic opportunities to get quality advice, and one way to do that is going through a PIPA-backed investment professional,” she said.
“There is no specific regulation for property spruikers; however, ASIC have them in their sights now and we’re seeing action being taken.
“You could say it’s too little too late, but any action we can see from governments and regulators is absolutely welcome. I think government has a responsibility to be making more decisions here – and more targeted decisions – so that by our next boom, we do have regulation in place that consumers are protected by.”
Ms Montgomery’s comments come after this week’s judgement by the Supreme Court of NSW against a property spruiker for unlawfully offering financial advice relating to SMSFs.
ASIC deputy chairman Peter Kell said property spruikers who recommend investment in property via SMSFs, or facilitate such an investment, and who do not have an Australian financial services licence, are breaking the law.
At present, property promoters are loosely covered by existing regulations around credit and financial services as well as the Australian Consumer Law and state-based Fair Trading laws, leaving potential for loopholes and gaps in regulatory oversight to be exploited.