James Barger-Bos, CEO of Finance Wise Global Securities Pty Ltd, has over 27 years of financial services experience. Fwgs is offering accountants a simple clear and cost-effective solution to the accounting exemption. By becoming authorised representatives they will have an intuitive web based software solution, a complete range of training options (including an RG146 face to face course) and, for the first fifty accountants, a share of the net profit.
In the first article of the series James went through a real life example of advice being completed today which would not be appropriate when the accountants’ exemption expires. James then reviewed the impact that the recent APRA changes are having on lending policy and the ever shrinking number of SMSF lenders.
In this article James reviews his experience in obtaining funding for an SMSF using the Bank of Queensland.
Firstly, why the BoQ? I have been asking myself the same question since 28 August when I signed the purchase contract. As a broker, we earn both an upfront and a trail from our lending clients. I was willing to ignore this benefit and use a lender not on my panel because of an appealing advertised rate.
Mistake 1! They advertised a 3 year fixed rate that included a limited time interest rate discount to 3.99%. Two weeks after the submission I was told that I no longer qualified. OK the rate is still 4.29% which is excellent and I have a finance deadline so I will push on.
Every document that was required on the SMSF checklist had been submitted to the Adelaide branch, to their Head Office and subsequently to a branch in WA. I was then required to submit information as a personal borrower as my wife and I are required to guarantee the transaction personally. We knew this and I wondered why I was never provided the additional checklist upfront. I constantly asked, “is there any other information?”. I was told “no”.
As an aside for accountants dealing with the accounting exemption, how many SMSF will you establish if the government does ban personal guarantees for SMSF loans? You may answer “some” but, without this security, will there be any lenders willing to pursue this risk? My guess: NO.
So, after 13 business days with the lender, the application was finally submitted to their credit team. This is very taxing on the nerves; when mortgage brokers are used to dealing directly with the credit managers on scenarios sometimes weeks before the submission.
Today is business day 24 and I am still waiting for the final Letter of Offer. I have received one which requested six additional items all of which were provided to the lender but not the credit team and when I asked for these conditions to be removed I was told that wasn’t possible. This is not an unconditional approval, by the way, it’s a document where I agree to pay fees for the next steps to commence.
Of most interest is the loan amount. I am being forced to take out more money which I DO NOT need. BoQ has a peculiar liquidity ratio so the more you borrow the more liquid funds must be in evidence at the time of the submission. I have to pay a split loan fee and an additional monthly fee before I payout the variable portion of the loan that I DO NOT need after settlement is completed.
I would not mind some of this grief if it was communicated in reasonable time, or I was getting paid, or I was at least confident of the outcome. I fear this tale will not have a happy ending..
So, with a combination of ASIC changes (RG146), APRA changes (making loans more expensive and reducing competition) and Government changes (deleting personal guarantees and exposing the lenders to significant risks) one might ask whether it is worthwhile for the suburban accountant to advise in this space after the exemption expires.
If you would like to discuss how the constantly changing banking environment would affect your capacity to provide advice once the exemption expires then please feel free to ask us by emailing firstname.lastname@example.org.
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