Thinking of investing in property? Who do you talk to?
Who gives you advice on property investment? It’s one of Australia’s biggest asset classes yet the purchase of residential property is usually made from a real estate agent. We’re a talented bunch, modest too, and we can help with info on local trends and plenty of on-the-ground resources. But are we best-placed to help you decide on investment strategy?
The law makers don’t think so, and some years ago legislated to prevent us, and others without a Financial Services licence, from making any comment on the investment potential of a property. We can tell you about its history but can’t offer advice or give predictions on future performance. We don’t have training or skills in assessing an investor’s position and working out what’s best for them. So fair enough.
But with more than a third of Australia’s population relying on investors to provide them with a home, you’d hope someone out there is helping Australian landlords invest in property. Many accountants, solicitors and other professional advisers are ‘pro-property’ and some financial planners do support it as the best fit for their clients. But unfortunately many planners simply don’t have sufficient financial incentive to suggest that their clients consider property. There’s a huge gap in the investment industry between the info available and attention given to residential property, as there is for other asset classes.
Financial planners currently receive fees for selling their clients into various offerings from financial institutions, and usually don’t get a penny for suggesting you buy a house. (Some are paid high commissions by property developers, largely made possible by the time and marketing costs the developers can save by using this sales channel. But the number of sales made this way is a drop in the bucket).
So the government’s current shake-up of the financial planning industry might be interesting to watch. The proposal is for planners to charge clients a fee for advice and not receive commissions. We understand the Financial Planning Association’s supporting the move away from commissions for investments to “ensure perceptions of conflict are removed.” Whether their clients will be prepared to pay enough for advice remains the greatest concern.
How might this key change the popularity of property investment? Will planners start digesting property stats and watching market trends. We’ll watch with interest.
We’d love to hear your comments.
‘Some financial planners do support (property) as the best fit for their clients.’That’s news to me, and I’m sure to many other property investors who have consulted financial planners. My experience has been that, whenever a property investor visits a financial planner, the investor is always advised to immediately sell all the real estate, and then give the proceeds to the financial planner, to invest in managed funds. The financial planner gets no commissions from a property investor’s direct investment in property, but does get commissions from managed funds. So guess which investment the financial planner is going to recommend? And how many real estate salespeople do you see, advising their clients to forget about real estate, and to put everything they own into the stock market? The tragedy is that there seems to be nowhere the investor can go to get unbiased advice about all asset classes, including direct investment in shares and property.