Broker urges industry to lift SMSF loan writing standards

Speaking to The Adviser, Mr Kevin said he has about 20 applications for SMSF loans sitting on his desk. At a time when rates are rising and lenders are tightening their credit standards, the demand for SMSF loans is red-hot.

Mr Kevin aggregates through AFG and has access to approximately nine SMSF lenders, believed to be one of the widest SMSF lender panels available. He said that while the major banks exited this space around 2016–2018, in recent years, there has been a surge in new SMSF credit products from non-bank lenders. In a win for consumers, this increased competition has put downward pressure on fees and rates.

“We were seeing strong volumes of residential mortgage settlements going through our office up until January,” he told The Adviser.

“Borrowers are jittery now and the banks have really ramped up their serviceability checks.

“But we are writing an enormous amount of SMSF loans. That’s largely what we have been doing for the past two months.”

SMSF lending has been a niche Mr Kevin has focused on since he started in mortgage broking in late 2020. Prior to that, he spent almost a decade at Suncorp in senior leadership positions across financial advice, superannuation, insurance, and SMSFs.

“My first job in finance was working with The Strategist Group under SMSF veteran Grant Abbott,” Mr Kevin said. “Since then, I have always had a soft spot for the SMSF space.

“I knew that there wasn’t as much collaboration happening between accountants, financial advisers and brokers as there should be. Brokers are somewhat looked down on by other professionals and I wanted to change that by bringing a higher level of professionalism and service offer.”

In 2021, Mr Kevin authored a strategy paper around increasing professionalism, education, and standards in the SMSF credit space. He lobbied the SMSF Association and met with senior executives in a bid to bring a specialist broker accreditation to market, which would recognise brokers who had the background, training, and expertise to work in what is a more complex lending niche. However, his efforts, so far, have proved futile.

“Mortgage broking is moving towards professionalism and having higher standards around SMSF lending should be an important part of that. Financial advisers had their FOFA moment and brokers are going through it now,” he said.

“The barrier to entry in this space is too low. At the moment a broker can do a few weeks of training and get accredited with lenders to provide credit advice to someone about making a large and complex investment property purchase with their retirement funds. That’s a risk.”

The broker added that he believed the current accreditation process to be “incredibly light touch”, which he said brings a significant level of risk to aggregators and lenders. However, there is a reluctance among SMSF lenders to narrow their distribution channel.

In his strategy paper, Mr Kevin outlined the strategic intent of creating an “SMSF Specialist Accredited Broker.” This includes lifting the level of professionalism in the mortgage broking industry by recognising that certain areas of mortgage lending are more complex and require knowledge, skills, and qualifications beyond the industry’s current minimum education standards and accreditations.

He would like to see SMSF-accredited brokers aligned with financial planning and accounting professionals and recognised for this with a specialist designation, he explained.

Critically, he believes more aggregators and lenders should be willing to reduce risk by increasing the competency of mortgage brokers advising on SMSF loans.

What do you think? Do you think brokers should be required to undertake specific training to write SMSF loans? Let us know in the comments below!

[Related: Why is SMSF lending taking off?]