Do Financial Planners recommend DIRECT Property Investment?

I hope I have asked the poll questions to get the best response.

I personally think that if I went to 100 financial planners with $100,000 to invest then NOT ONE OF THEM would recommend that I use that 100k to purchase an investment property, even if by interviewing me they thought a direct real estate investment would best suit my "investment risk profile"

I am really curious to see what others at Somersoft think.

Of course they wouldn't. Financial planners don't understand how money works, they only understand how commissions work.

I have only ever spoken to two. They talked about shares, managed funds, superannuation, insurance, wills, margin lending. Oh, property trusts as well

No property (direct) anyway, but why would you expect that. There is no revenue stream for them from their clients investing in directly into property.

Edit: When mentioning about property, they did have a mortgage broker that they could refer me onto though.

Yes I agree with both comments and therein lies the problem. We are saturated with media reports advising 'joe public" to see a financial planner to assist with their finances. And "joe public" (and I was one of them) truely believe that this financial planner would recommend whatever was the best investment which would include direct property investment.

Well of course I know better now but unfortunately most people don't.

I also bet you would never get a financial planner to admit that they don't recommend direct property investment, they would just say that the plan they have come up with for Joe Bloggs best suits their particular circumstances

Actually yes

I presently work for a financial planning company, and whilst we don't at present recommend direct residential investment property (and would agree that the majority of financial planners don't) I have in the past worked for a company who do, and know another financial planner (very well) who does and has been recommending property for 5+ years.

Also, bear in mind that there are great financial planners out there who cannot recommend direct property (as a result of their advice license and limitations on recommended product lists which they must comply with), however some of them make up this allocation with Listed property trusts etc.

In summary, it's a small percentage, but there are some out there that do it, and even of those that don't, there are some great ones who simply can't.

Im a qualified fin. planner and you can talk to me all day about direct property investment
pieman

Yes, I've finally found a financial planner that encourages IP's and will help me develop a strategy I like!!

they can/will;

Setup a trust for me to minimise my PAYG tax
Help with sourcing PI's
Help with finance/overall strategy
Help with Tax returns

When I say "help" I mean they only give as much input as I want..

I know of a couple that do but the trouble is the comms that are paid are generally a lot slower than those from managed funds... planners don't like to wait 2 years for their money any more than a plumber or mechanic would like to wait that long for payment.

shares outperform property anyway so why would a planner recommend it?

Financial Planners and Real Estate

I've been in the real estate business for over ten years as a real estate attorney, investor, realtor and property manager. Any decent financial planner would recommend that an investor maintain a diversified portfolio. Real estate investments should be a part of that diversified portfolio. In fact, now is probably the best time in a generation to pick up a solid real estate investment property. As long the fundamentals are solid and the property can generate a positive cash flow, the investment will be a good, especially over the long term. I think it's a great time to buy, especially in the U.S.

pieman said:

Im a qualified fin. planner and you can talk to me all day about direct property investment

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Likewise (though I am not fully qualified yet).

You do the right thing by the client and everything else takes care of itself.

The title "Financial Planner" just sounds like they should be an adviser on most investments.

Property is for most people there biggest investment so it is bizarre why more planners do not advise on it.

They can make money by having an arrangement with many property sourcing company's.

AUSPROP... said:

I know of a couple that do but the trouble is the comms that are paid are generally a lot slower than those from managed funds... planners don't like to wait 2 years for their money any more than a plumber or mechanic would like to wait that long for payment.

shares outperform property anyway so why would a planner recommend it?

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Do you understand levarage?

Hi Guys,

I've only ever spoken to three FPs. The first two only recommended managed funds, but the last one recommended direct property.

In fact they, Navra Financial Services, consider direct property as the cornerstone of their financial structure. They recommend property for growth due to its tax advantages and leverage potential, and shares for income to offset the holding costs of negatively geared direct IPs. Their structure encompasses this.

So, 1 out of 3 makes it a 33% hit rate. A lot higher than 1 in 100.

Cheers,
Michael

boomtown said:

Of course they wouldn't. Financial planners don't understand how money works, they only understand how commissions work.

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yeh and realestate agents also understand how fat commissions work on property.. they also tend to put on a 'financial planner' hat on at auctions..

I believe freemanfox are happy to recommend you property, and even sell you property and manage it for you..

MichaelWhyte said:

Hi Guys,

I've only ever spoken to three FPs. The first two only recommended managed funds, but the last one recommended direct property.

In fact they, Navra Financial Services, consider direct property as the cornerstone of their financial structure. They recommend property for growth due to its tax advantages and leverage potential, and shares for income to offset the holding costs of negatively geared direct IPs. Their structure encompasses this.

So, 1 out of 3 makes it a 33% hit rate. A lot higher than 1 in 100.

Cheers,
Michael

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Hi Michael,

They sound very good. Do/can they source IP's as well.

I mostly use (myself and clients) APS Growth/Immanent Wealth at Brookvale as they offer most types of investing with a balance on leverage and cash flow.

They also source properties which is good for many people especially when starting with property.

crc_error said:

yeh and realestate agents also understand how fat commissions work on property.. they also tend to put on a 'financial planner' hat on at auctions..

I believe freemanfox are happy to recommend you property, and even sell you property and manage it for you..

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I think the important point is that many people are not shown the advantages of properties relatively safe leverage compared to shares etc. Thats a shame.

Maverik said:

I think the important point is that many people are not shown the advantages of properties relatively safe leverage compared to shares etc. Thats a shame.

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To be fair to financial planners, they can't recommend everything. Its like saying how come they don't recommend buying precious metals, coin, art, vintage cars, stamps, wine etc etc.

Not everyone wants the hassle and expense of buying and managing IP's and are happy with just shares.

If your specifically after IP's, then there are heaps of mobs who promote property investment and are happy to sell you IP's. The onus also falls onto you to find a planner who will invest in the style your after..

crc_error said:

To be fair to financial planners, they can't recommend everything. Its like saying how come they don't recommend buying precious metals, coin, art, vintage cars, stamps, wine etc etc.

Not everyone wants the hassle and expense of buying and managing IP's and are happy with just shares.

If your specifically after IP's, then there are heaps of mobs who promote property investment and are happy to sell you IP's. The onus also falls onto you to find a planner who will invest in the style your after..

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Fair enough. I still believe more people should use a Financial Planner and wish more Planners offered direct property options.

I guess the reason for me posting this question is that I know of a few friends who have (over the past year) been to financial planners lately and in all three cases the financial planner ONLY wanted them to invest in a product that they the financial planner could make a commission on (usually a trailing commission) and my beef is that the average person out there goes to a financial planner thinkin that this person is the ONLY person to see in relation to their investment needs, whatever it is. And we know this is usually (with some exceptions) NOT the case.

I know there will be arguments that we as individuals should educate ourselves better about the different asset classes and who to see for what, but the Financial Planning Industry has brilliantly set itself up as a perceived "one stop shop" for creating wealth and this is just not true.

That is what irritates me

Petal said:

I guess the reason for me posting this question is that I know of a few friends who have (over the past year) been to financial planners lately and in all three cases the financial planner ONLY wanted them to invest in a product that they the financial planner could make a commission on (usually a trailing commission) and my beef is that the average person out there goes to a financial planner thinkin that this person is the ONLY person to see in relation to their investment needs, whatever it is. And we know this is usually (with some exceptions) NOT the case.

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Why are you so fascinated with financial planners receiving commission on the products they recommend? Do you kick up a fuss then a doctor gets a commission for prescribing drugs to his patients?

financial planners offer a service, and expect to get paid for it. They also have to pay large compliance costs which they also have to recoup from their clients. Like any business, they require a income to survive, and in the case of a financial planner, its via upfront commissions and trailing fee's. All disclosed in the statement of advise which is given to the client.

Financial planners could very easily make commissions on direct property.. and they could so via selling you a loan, which also pays a trialling commission (this is how mortgage brokers survive), and also charge you management fees when you rent it out. They could also collect part of the initial agent sale commission by referring the purchaser to the agent or builder if its off the plan.

Petal said:

I know there will be arguments that we as individuals should educate ourselves better about the different asset classes and who to see for what, but the Financial Planning Industry has brilliantly set itself up as a perceived "one stop shop" for creating wealth and this is just not true.

That is what irritates me

Click to expand...

As I said before, financial planners will offer investments which are on their approved products list. They can't just recommend anything to you. There are many investments which are not within their scope to recommend, like I pointed out above might include art, stamps, coin, precious metals, collectibles, sports memorabilia and the list goes on.

When you go to a doctor, is he going to offer you every sort of treatment under the sun? Could be homeopath, Chinese medicine, conventional medicine, Bowen, or even a witch doctor? Do you get upset cause they only offer you treatment in what they are trained in? Again, its up to you to choose the type of treatment your after, and then go to the appropriate doctor concerned who offers it.