Join our investing community

Financial Advice Certificate

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Billv, 20th Aug, 2009.

  1. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Hi

    I'm getting a SMSF homeloan from ST George and together with the loan documents they've sent me a FINANCIAL ADVICE CERTIFICATE form to complete.

    It seems like I'll need a financial advisor to sign it.

    Is this a new requirement?
    A SMSF loan is considered commercial and is not protected by consumer credit code so I don't see why they'll be asking for this.

    Has anyone experienced this before?

    thanks
     
  2. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    Billv,
    It is to protect their proverbial backsides. I do some work with seniors as well and it is a requirement to have both legal and financial advice sign-off. Often the cost of the advice for a $20k loan is out of proportion to any benefit.

    An accountant or advisor will normally be used to set up a SMSF, the banks will run the trust deeds through their own legal department (outsourced lawyers) at a further cost to you and that also want you to have a certificate on top of all of that just says bureaucracy and lawyers gone mad.

    Try another lender.
     
  3. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Greg

    Thanks, the loan will settle soon so its too late to try another lender.

    The funny thing is that the form simply states the obvious
    i.e you understand that you are borrowing money and you'll have to pay it back plus pay monthly interest etc etc.

    Not rocket science stuff really to justify going to a specialist to sign it.
    I don't mind paying for advise but being forced to get additional advise
    on top of what I've already got and in the last minute
    when the property is about to settle is a bit extreme IMO.

    I think in due time STGeorge will realise that there is no need to trouble their customers and that the signature of a qualified accountant/ tax agent would be more than enough.
     
  4. roidz

    roidz New Member

    Joined:
    19th Apr, 2008
    Posts:
    4
    Location:
    newcastle,nsw
    Hi Billy,
    Your loan set up will most likely include an installment warrant over the asset that your fund is buying and as such you will need an adviser to sit down and explain how it works. It is a different set up to a normal loan agreement but a must if your arrangement is to pass ATO requirements. An accountant may do it but only if qualified as an adviser also, tax agent definitely not.
    It is not new and is standard practice i am setting one up now with a third party private lender and same requirements to be met.
    Cheers,
    roidz.
     
  5. bernardp

    bernardp New Member

    Joined:
    1st Sep, 2009
    Posts:
    3
    Location:
    Sydney, NSW
    Hi Bill,

    These forms are a massive pain in the arse. As an accountant sitting down with the client discussing this thing is a time waster - and we do have to charge the client for our time - which they really love.

    It is just yet another method of the banks and institutions transferring risk aways from themselves towards the accounting profession.

    Who do you think the bank goes after if things go awry? The accountant.

    (End whinge).
     
  6. roidz

    roidz New Member

    Joined:
    19th Apr, 2008
    Posts:
    4
    Location:
    newcastle,nsw
    Hah! The paperwork is a walk in the park! try this on for size. Client looking to purshase a commercial property in which his restaurant is located using SMSF borrowing. First step goes to accountant he advises setup of bare trust and new SMSF. Client goes to bank(major) bank says max LVR 30%. Client comes to me we contact private lender they will do 65% on virtual asset lend minimal financials, slightly higher rate, client happy. Begin the process lender not happy with bare trust so drops it out and goes with warrant only.(more costs) Client solicitor no idea how the whole thing works and lets cllient sign and exchange contracts(no approval yet). Solictor calls me and asks will we be settling within 10 days. ( haven't even got the warrant signed) Organise valuation,it comes back $200,000 light. Of course LVRs now blown out of the water and shortfall of funds. Attempt to contact vendor to renegotiate won't even return calls, knows he has purchaser by short and curlies.If he does't by rent will increase by 35% on new lease and no nearby options to relocate. Forgot to mention solicitor allowed him to pay $56k deposit on exchange. Client against our advice is still going forward with deal even with the $200k premium his reasoning, no choice. Moral to the story, make sure you embark on this type of investment with experienced people and do your own due diligence.
    Cheers,
    roidz.
     
  7. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    I agree 100%. It's so easy for things to go wrong.

    I was actually lucky and everything went as planned but could had gone the other way as well and if I didn't have experienced people to back me up I would have been in trouble.

    So if anyone wants to go down this path, start with a mortgage broker who is experienced in this area. 1 who only does SMSF loans would be a good start and if you don't have a solicitor to go to use the recommended solicitor
     
  8. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Bernardp

    The content of the form is not too bad but if you are not comfortable with it don't sign. My accountant/financial advisor had no issues with it
     
  9. bernardp

    bernardp New Member

    Joined:
    1st Sep, 2009
    Posts:
    3
    Location:
    Sydney, NSW
    Yes I was more referring to the risk transfer onto the acocuntant. I guess from my experience, particularly recently, banks are always asking for letters from our office to confirm the financial position of the client, asking for us to sign off on this. Perhaps it just gets to me that the bank lends the money and wants to transfer risk onto anyone they can.

    Roidz scenario is a beauty - that is quite extreme, but I guess it does happen.
     
  10. roe

    roe New Member

    Joined:
    21st Dec, 2011
    Posts:
    4
    Location:
    Sydney
    Billy, can you tell me who you ended up using for the financial advice certificate?
     
  11. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    It was not exactly a certificate, it was an FA form we needed filled out to meet the lending requirements.
    My accountant signed it
     
  12. roe

    roe New Member

    Joined:
    21st Dec, 2011
    Posts:
    4
    Location:
    Sydney
    Hi Bill,
    Thanks for your response. I am also in similar circumstances; obtained a smsf loan through St George and they want me to seek a financial advisor to sign the form. I have had quotes of around $2500 which is ridiculous, to tell me what I already know. My accountant will not sign it, as you need a licenced financial advisor as per St George requirements. Are you able to help? How much did your accountant charge you for this service?

    Thanks
    Regards
    Roe
     
  13. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Hi Roe

    He didn't charge me anything.

    However, my accountant handles ALL my financial affairs and we have a very close business relationship which means that we discuss all my investments and he warns me on the dangers involved. He's the one who helped me setup my SMSF and we discussed the issue a lot before going ahead so he would have signed the doc on that basis and not as a licenced financial advisor.

    I don't recall the content of the certificate but I believe it was written to protect the bank so it would have been harmless to an accountant.

    The lender would not really care if it was signed by a financial advisor or by the Pope, so my suggestion would be to show this paper to the accountant who created your SMSF so he can have a good read and take it from there
     
  14. roe

    roe New Member

    Joined:
    21st Dec, 2011
    Posts:
    4
    Location:
    Sydney
    :) thank you Bill, you have been helpful!