Diversifi Perth principal and 2016 Better Business Awards finalist Ashleigh Wight speaks to The Adviser about why she decided to crack into the SMSF market.
What are the benefits of diversifying into SMSF lending?
Not many brokers offer this service, nor have truly grasped the concept and various entities/structures of SMSF lending.
This not only provides a niche for brokers and an additional revenue stream for those diversifying into the SMSF space, but gives such brokers a competitive edge, as they don’t have to refer their clients elsewhere or send their clients to the bank directly.
What are some of the challenges of SMSF lending, and how do you combat these?
A larger deposit is required and clients require a lot more education surrounding investing through super.
Most like the idea or have heard of SMSF lending, but have not sought comprehensive advice from their financial planner and/or accountant, so aren’t even sure of whether it is suitable to them or possible for them to achieve.
I overcome this challenge by promoting my SMSF lending expertise to accountants and financial planners, so the client sees me for SMSF lending advice only after consulting with their planner or accountant, if not both.
How do you identify a SMSF lending client from amongst your residential loan book?
Any client who has a super balance in excess of $200,000 and who is actively engaged with a financial planner would be a potential SMSF lead.
However, I do not actively pursue these clients, as they need to ask advice from their financial planner and accountant first.
How does the SMSF loan process differ from home loans?
There are more entities involved in SMSF lending, which takes longer for the actual SMSF structure to be finalised and set up.
As such, it is imperative that the client is aware of who the borrower and legal owner of the property is, to avoid things such as double stamp duty implications.
An SMSF loan will normally take up to 28 days to be approved, as the various trust & SMSF deeds need to be reviewed by the bank’s lawyers to ensure they comply with current SMSF lending laws and regulations.
Furthermore, depending on the lender, the clients may be required to seek independent legal/financial advice, which is not always required with traditional residential loans.
Another important difference is the contribution/deposit required for an SMSF purchase, as the banks will normally only lend 70 to 80 per cent for a residential purchase and 65 per cent for a commercial purchase, through super. That sees the remaining 30 to 35 per cent plus stamp duty and fees being required from the super fund, which is significantly more than a purchase in one’s personal name.
Do you see more brokers moving into SMSF lending in the future?
Yes, slowly but surely, if brokers are prepared to put in the time and effort to understand the complexities of the SMSF set-up and undergo the necessary education on how the SMSF lending process works.