Property spruikers look out
Some of the worst financial advice that I have seen has come from property development firms masquerading as financial planning firms.
They use a variety of marketing techniques to get clients in for a meeting (such as cold calling and radio adverting). Clients think that they are getting financial advice – what they are really getting is a hard sell to make a property investment – either a house or land package or a villa. The investment is always in another state from where the client lives and is usually in a remote location.
These firms go through a charade of providing financial advice – they will provide a statement of advice that looks much like an actual statement of advice that would be provided by a real financial planner. They are usually aided by unscrupulous mortgage brokers who are often part of the same organisation.
This type of spruiker has carefully structured their affairs so that even though they held an AFSL they fell outside of the financial services compensation regime administered by the FOS. The reason being that providing advice about a direct investment in property did not involve the provision of a financial service (because the advice is not about a financial product – property is not a financial product) and therefore the FOS did not have jurisdiction.
Thankfully, AFCA’s Rules are different – under its Rules the holder of an AFSL that provides advice about property investments can be the subject of a complaint – anybody who is a victim of these firms (I know for a fact that there must be thousands of such people) should make a complaint and seek compensation.