Andrea Slattery

The SMSF Professionals’ Association of Australia (SPAA) has developed best practice guidelines for SMSF limited recourse borrowing arrangements (LRBAs) – with the National Australia Bank (NAB) agreeing to adhere to the two separate guidelines on lending and advice.

SPAA CEO Andrea Slattery says: “NAB is the first lender to sign up for both guidelines, and SPAA is continuing to work with the other lenders in this space. We are hopeful they will follow suit soon and adopt them.”

Slattery says SPAA has been “very conscious” of the concerns expressed about LRBAs by the Financial Services Inquiry (FSI) and the fact a “tiny rogue minority” has been spruiking this borrowing facility, and as such believes there is an urgent need to establish a set of guidelines that will ensure a responsible approach taken to all LRBAs.

“SPAA has always stood for best practice guidelines for the SMSF industry whether it be education, financial advice or auditing. The decision to adopt a similar approach to LBRAs is further evidence of SPAA’s commitment to building integrity for the industry and best practice behaviour for consumers.

“We believe that by publishing these guidelines, and with NAB signing on and other major lenders in the pipeline (the major banks are estimated to have more than 85% of this market), the Government and regulators can have a high degree of confidence that LRBAs are being used appropriately and that the industry has best practice guidelines for lending and advice in place.

“SPAA hopes that other lenders and providers of financial advice will take the opportunity to use the guidelines and make a public commitment with SPAA to adhere to them in their business practices.”

Slattery says two sets of guidelines have been developed for the industry – LRBA lenders’ best practice guidelines and LRBA advice best practice guidelines.

“The lenders’ guidelines are intended to establish banking industry standards that can complement individual LRBA Credit Policy and Practices regarding LRBA lending to SMSFs.

“The advice guidelines are proposed to create a best practice standard of advice that should be provided to SMSF trustees considering the use of LRBAs if they elect to seek personal advice.

“SPAA is confident that adherence to the guidelines by the banking and financial advice industry will ensure that LRBAs are being used appropriately by SMSF trustees, and is intended to encourage self-regulation in the SMSF lending sector whether by lenders or advisers,” she says.

The post SPAA establishes best practice guidelines for SMSF borrowings appeared first on AdviserVoice.

Andrea Slattery

The decision by the SMSF Professionals’ Association of Australia (SPAA) to engage with government, regulators and industry on Limited Recourse Borrowing Arrangements (LRBAs) exemplified its commitment to improving professional standards in this superannuation sector.

SPAA CEO Andrea Slattery told the 10^th SPAA national conference in Brisbane yesterday in her opening address that the organisation was working closely with a wide range of stakeholders on LRBAs as they relate to SMSFs and “will be able to provide government and regulators current information on what is really happening in this space.

“SPAA will also introduce Best Practice Guidelines for lenders and advisors, and by doing so it will allow the regulators to have the confidence to better target their policy settings.”

She said it was important to understand that about 90% of all current LRBAs represent less than 1% of all SMSF assets. In addition, APRA statistics show that the average loan value is $311,000, the LVR for a LRBA is typically between 60-75%, and the average asset value underlying the loan is about $450,000. “This does not paint a picture of irresponsibility,” she says.

Slattery said SPAA’s involvement in the LRBA debate was just one example of where SPAA was demonstrating its leadership credentials in the SMSF sector.

“Over the coming year, our advocacy and thought leadership program will address many of the challenges.

“SPAA’s main focus will include the Financial Systems Inquiry, tax inquiry and the pension inquiry that includes the ageing population and retirement debate.

“We will also be providing valid argument and guidance on how SMSF capital can be unlocked and used more efficiently for new markets such as infrastructure and bonds.”

Slattery told the 1400 delegates that the need to continue improving their professional standards had never been more important, and that SPAA was the only vehicle for achieving this ambition.

“SPAA is committed to continually raising professional standards and has now created a career pathway for our existing professionals and new entrants to build our industry

“Today the importance of you continuing on your learning journey is paramount in building an SMSF profession.

“SMSF trustees are demanding value-added advice and services and they deserve to get this advice and services to meet their expectations. This factor was highlighted by the SPAA-Russell Investments annual report into the SMSF sector that was released yesterday.”

The post SPAA takes responsible position on LRBAs appeared first on AdviserVoice.