Frustration grows at lack of regulation for property investment advisors

Prominent property adviser Margaret Lomas has slammed the Federal Government for refusing to act on the regulation of property investment advisers, claiming the Labor Government has failed to deliver on a commitment of crackdown on rogues in the $450 billion property investment sector.

Lomas, who owns Destiny Solutions and is the chair of lobby group the Property Investment Professionals Australia, says that in 2008, then Assistant Treasurer Nick Sherry promised to examine regulation of the property investment sector.

But Lomas says that attempts to reignite the push for regulation with the Government have failed and last week she held a meeting with Liberal senator Mathias Cormann, who is shadow spokesperson for finance and superannuation, in a bid to bring attention to the issue.

“The Government have just been so bad on this. I am sending them email after email and they are not even responding,” Lomas says.

“It’s mysteriously disappeared from the agenda, with no explanation.”

Lomas hopes to push for the Opposition to question the Government in Parliament in the New Year to prompt some action.

While the Australian Securities and Investment Commission tightly regulate the provision of financial advice, direct property investment advice is not considered a financial product, and as such is not regulated.

However, Lomas disagrees with this position and says a lot of property advice borders on financial advice.

“A person goes to a property investment adviser with $1 million to invest in equity, but ASIC says it’s not a financial product.”

“If you are telling people what you can do with equity in their home, which can effectively be turned into a loan, then you are dealing with a financial product.”

The Government has previously promised to act against property spruikers, but Lomas argues these rogues only account for about 2% of the 3,600-plus businesses that provide property investment advice.

She is more concerned by property investment advisers who are working in concert with developers and are pushing property on developers with little or no disclosure.

“What they are really doing is selling property on behalf of developers and taking a very nice cut,” she says.

The PIPA believes the solution is to create a specific licensing regime for property investment advisers that would require them to earn a qualification that would need to be updated, similar to that of a financial adviser or accountant.

“What the hell is going on? The banks are regulated, the financial advisers are regulated, but you don’t need to have any education or any license to offer people advice on how to spend their money on property.”