Seeking financial advice

Real estate agents are not financial advice experts

Agents at all times should be very careful when discussing topics outside of their expertise,
especially when giving advice that could be defined as financial advice.

Typically, topics that are outside of an agent’s area of expertise include a property’s income-producing
potential or the income tax benefits of buying the property or insurance.

It’s a good habit to advise the customer to seek specialised advice when asked anything that falls under these headings.

For example, when speaking to a buyer who is thinking of renting out the property, the agent may be
asked what gross yield, or rent, the property could potentially attract. It is important to be very clear and limit your comments to the rental market generally, such as what the current vacancy rate is and what similar properties in the area are renting for when speaking to a buyer who intends to rent out the property. It is common that an agent can make no assertions about the potential rental revenue and gross yield that the property could potentially produce.

Another high risk topic is that of buying real property through selfmanaged super funds. This is an
area that a real estate agent can not advise buyers on. The response should be to suggest the buyer seeks professional advice from a qualified financial advisor.

If an agent was to give investment advice the agent would be required to be licensed by Australian Securities and Investment Commission (ASIC) as a financial advisor, or if the agent provides an opinion or arranges insurance on behalf of their client, the agent is required to either hold an Australian Financial Services licence, be appointed in writing as a distributor, or an authorised
representative or corporate authorised representative of a licence holder.

It would be rare for agents to hold the above qualification.

Real estate agents are required by legislation to take all reasonable steps to be informed regarding
the essential facts which affect current market conditions in order to be in a position to advise their
clients and, or, to assist customers in a responsible manner. It is recommended that in specialised
areas, which fall outside the scope of the duty of a real estate agent, that the client or customer is advised to seek more specialised advice.

This shortened article first appeared in full in the REIQ Journal, March edition. To read more articles like this, make sure you have opted in to receive the digital copy of Journal in your mail preferences. Non-members can subscribe here.