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 (see attachment).
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 SMSF Professionals’ Association of Australia (SPAA) is the authoritative voice for the self-managed superannuation fund (SMSF) sector. SPAA, which represents professionals providing a range of services across various disciplines in the complex area of SMSFs, is an advocate for the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice.