SINCE the Global Financial Crisis, there has been a huge range of reforms to the financial planning industry.
However, one of the greatest problems in this space has been absolutely ignored - that is the lack of regulation in the property investment industry.
Think about this. The property investment industry is virtually regulation free - anyone can wake up, decide to become a property investment adviser, and set up shop giving advice about property investing. There is no licence required, no education or training needed, and no supervisory body.
To make matters worse, property investment "advisers" usually operate without any kind of professional indemnity insurance because underwriters refuse to provide coverage for activities which are unregulated. Consequently, if you suffer a loss due to poor advice you will have no capacity to recover that loss.
ASIC provides no supervision because a property investment is not recognised as a financial instrument.
Thanks to the government's inability to tackle the problem there is now a stark contrast between financial advisers and stockbrokers who are highly regulated, and property investment advisers, who are unregulated. Despite years of financial education, it is a sad reality that the average Aussie still feels safer in bricks and mortar than in shares. They are more likely to gravitate to a so-called property investment adviser, with no licence, no training and who is not required to disclose to you any commissions they may receive from any sale to you. These can be as high as $40,000 a property.
If this scares you as much as it scares me, take some action and contact your local federal member. We need adequate regulation and we need it now.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: firstname.lastname@example.org.
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