Stirring the pot
Well yes it is about time this subject was highlighted:
The complaint I commonly receive about Financial Planners is that firstly the large majority are NOT into property.
So, is this because they regard property as a bad investment?
Or, could it be that they don't receive any commission if you buy property directly??
Or, maybe they think property is good, but they do not have the knowledge or qualifications to make adequate recommendations about property??
The second major complaint is that their plans very rarely seem able to solve the problem:
Example: You wish to be financially Independent in 10 years time:
Okay, so their plans include managed funds and also some managed funds, and super of course and then some managed funds as well. Ahem Mr. Planner, what about property? "Hmmmmmm, bit risky don't you think and you will have all that debt, aah and what happens when you don't have a tenant. Better we create a fully diversified portfolio of various managed funds. In fact you could spread you investments into these 12 or more different funds, see they all have different attributes and thus we are spreading your risk. Very safe indeed!"
In fact if we spread the investments around far enough, it doesn't matter if one or another fails because you will get the greater average of how they all perform.
(Sheesh, and I always wanted to be average)
What happens if they all do badly?
WHAT? All of them?? Really, really - can you see all of them doing badly at the same time?
(What about these last three years??)
"Hmmmmm, well you do have to expect that the market can go down as well as up. After all, shares are a long term investment. In the long run it will all be ok."
Yes, but what about my attaining financial independence?
Uh hmmmm, now lets look at your risk cover, see if you want to be truly independent then you need to have lots of risk cover. At least 20 times what you currently earn . . .
[Humorously written by Steve Navra]
Okay BEFORE you shoot me down, I am a Proper Authority Holder
Salisbury Group Pty Ltd
Dealers license no: 191 566
My real contention regarding this issue is that most planners have completely missed the boat when it comes to diversification.
There are three main mediums in which you can invest:
1) Property
2) Shares
3) Cash
True diversification means utilizing ALL THREE mediums.
Note: spreading investments amongst 3 to 12 different managed funds is NOT diversification. It is spreading / averaging the portfolio. Managed funds make up a mere 5% of total funds invested (Ref: FPA) so how on earth anyone can claim that spreading investments into a 5% segment of the market is diversification, is beyond me.
Property offers the advantage of safe leverage. (Not my opinion, rather it is the reason why banks will lend up to 90+% of the assets value.)
Shares offer a good return, but the leverage is not as safe. (See the banks offer max 60% to 70% leverage IF it is a strong blue chip company)
Cash provides liquidity, serviceability and stability.
ALL THREE ARE NECESSARY to create a balanced and diversified portfolio.
Better still, if you can employ the same dollar simultaneously into all three, then you might well become financially independent in ten years!
Now, if you will just sign on the bottom line . . . there where I have marked it with X________________X
Well then, I promise to lock all your money up in your super for the next 32 YEARS. Not only can you or anyone else ever get to it, but hey look at the great tax benefits.
Couldn't be safer than that, now could it?
PS: Hmmmmm, well yes I meant to disclose that I will be receiving all these commissions - well you can understand this, after all how on earth am I to become financially independent if I do all this work for nothing?
