Trade body urges brokers to reassess software, structures and marketing to avoid unlicensed financial advice risks
Mortgage brokers are being warned that using property investment modelling software for clients with assets held in trusts, companies or self-managed superannuation funds (SMSFs) may amount to providing unlicensed financial advice under the Corporations Act 2001.
The Property Investors Council of Australia (PICA) has cautioned that this risk extends to buyers’ agents, accountants and other property professionals who do not hold an Australian Financial Services Licence (AFSL) or appropriate authorisation.
PICA said it is seeing a growing range of software platforms and apps promoted to real estate, property advisory, lending and accounting professionals, allowing them to project or track the performance of property portfolios within these structures. Where those professionals are unlicensed, their use of such tools in client discussions may be considered regulated financial product advice rather than general property information.
“Many professionals may be unaware that using these software modelling tools and apps in relation to property owned by clients in trusts, companies or SMSF’s means they are giving financial product advice, under the Corporations Act, which is against the law,” said Ben Kingsley (pictured top), chair at Property Investors Council of Australia.
The council stressed that interests in trusts, companies and SMSFs are defined as financial products under the Corporations Act. Any guidance about acquiring property through these vehicles, or assisting clients to manage portfolios within them, is therefore treated as financial advice – whether the advice is personal or general.
PICA warned that the use of software does not reduce this exposure. If a broker or other intermediary uses a modelling platform to illustrate how property held in a trust, company or SMSF might perform, the activity is treated in the same way as providing advice directly. Even suggestions framed as education, illustration or general information may be captured if they influence the client’s decision-making.
By contrast, the organisation noted that using modelling tools for property held in an individual’s own name falls outside the same regulatory scope and has long been accepted practice in the property investment market.
The council said mortgage brokers, buyers’ agents and accountants need a clear understanding of where their role ends and licensed financial advice begins when dealing with ownership via trusts, companies and SMSFs.
“Unless you are a financial planner, using any tools that analyse or track the current or future performance of property in these entities for a client, crosses a clear legal boundary, even where the intent is education or illustration,” Kingsley stressed.
PICA also reminded professionals of the consequences of operating a financial services business without an AFSL. Under section 911A of the Corporations Act, individuals can face up to five years’ imprisonment and civil penalties of up to $1.565 million per contravention, while corporations can be liable for civil penalties of up to $15.65 million per breach.
Marketing practices are also under increased scrutiny. PICA warned that promoting personal investment results or client outcomes to attract business may infringe misleading or deceptive conduct provisions, particularly where statements imply consistent returns, limited downside or guaranteed outcomes. ASIC guidance indicates regulators will consider the overall impression created by promotional material, rather than relying solely on disclaimers.
The council added that promoters may become responsible for testimonials and comments once they are aware of them, and that personal success stories can, in some cases, amount to a recommendation and trigger financial advice obligations.
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