Financial Planners & Property

Discussion in 'Property Investment - Other' started by FinSpec, 1st Sep, 2009.

  1. FinSpec

    FinSpec Member

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    Hi there everyone!

    Obviously I'm biased, but I'm really curious to know who out there have used a financial planner and actually found them to be of some use to them?

    We've all read some pretty horrid things (most of them being true), but being a planner that loves property (and recommends it:D) I'm just wondering what the general attitude is these days.

    I still keep hearing that people go to financial planners and get the same message - sell your IPs and buy this managed fund.

    Most planners I talk to still don't want to know about property, but bit by bit some of them are wising up to the fact that they're wrong!
     
  2. rugrat

    rugrat Member

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    DH and I have been to see a financial planner. The company we went too actually have a very good understanding of property, being proprty investors themselves.

    Were they useful? 'yes'.
    They didn't really provide me with any new information (having already been obsessive in my research and figures), but they did reaffirm everything I had thought and (more importantly in veiw) they educated my DH and made sure that he understood everything. :) Somehow he always takes in the information better if it is presented by someone other then myself.

    They also talked about 'other' investments, but basically told us that at this stage we are best just focusing on PI, as we already had a good understanding of it and other reasons. And that we could start to diversify our investments at a later date.

    We have the option for them to run all our 'figures' in more detail and provide us with 'projections' etc. However we chose not to do this, because (thanks to some wonderful SS members) we have some pretty good spreadsheets to run these figures ourselves.

    The good thing about these financial planners is that their company also offer accounting services with a good knowledge of PI. We will be seeing how good this is next year at tax time.
     
  3. Dazz

    Dazz Banned

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    Well Hi there to you too !!


    I believe a fully licenced, fully endorsed, fully certified, fully registered, fully qualified ASIC / FPAA / APRA / ASIO / CIA / FBI / MI5 fellow associate financial planner who has sat every course known to man and has a gazillion certificates up on their wall with great big red bows in the lower right hand corner and framed in polished walnut, in conjunction with a great love and passion for property investment, provides you with absolutely no authority whatsoever.


    IMO, your wealth creating "runs on the board" track record would need to be uber-high before I would take any notice of what you had to say in terms of property investment.....it's such a massive and detailed subject, even if you restrict yourself to one state and one set of legislation.


    I gather the vast majority of the folks coming to you and paying - what ?? - $ 300 / hr or more for your <read and sign off disclaimer in full> advice would be bunnies themselves and probably think anything you said was absolute gold.


    I'm convinced that you are not "really curious" or "just wondering".....but rather hoping that your website and taglines below your post will generate leads for your business.

    The practice is dodgy but acceptable as per the SS rules, so knock yourself out.
     
  4. Reality Cheque

    Reality Cheque Member

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    In my experience financial planners are a bit like used car salesmen. They push you in the direction that is of most advantage to them. I've noticed quite a few "strictly share only" advisers have started advising on property in the last 12 months. At the moment it's easier to sell.
    The same reason why planners will whole heartedly recommend a particular fund manager almost to the exclusion of all others. Then 6 months later they'll tell you to forget about that one and move to another manager. Wherever they are getting the best kick backs.

    Finspec,

    Why is it that most planners are biased towards managed funds? Might it be because they get on going kick backs from fund managers that they don't get from direct property investment?


    RC
     
  5. JamesGG

    JamesGG Member

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    I know the question wasn't directed at me, but hey. I'm here now. :p

    In many cases, yes, managed funds are the default recommended investment because it they provide generous commissions to the advisor. However, in my more optimistic of moments, I do think that it's also because of the managed part, not just the funds bit.

    Ie, most retail investors looking for guidance on such things don't want to actively manage an active portfolio. They just want somewhere to put their money where it will, ideally, provide a reasonable return without them having to work for it. Same reason that these same investors went to a financial planner in the first place instead of researching other potential investments (including other managed funds, even) themselves. It's easy money, so the theory goes, for both the advisor and the investor.
     
  6. Ausprop

    Ausprop Member

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    even easier for the stooge of a fund manager as they struggle to beat the index!
     
  7. Aaron Sice

    Aaron Sice Seldom Seen Kid

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    i would wonder if someone is so across financial planning and matters, why are they still selling their time...?

    if i had the kind of knowledge espouted by some folk, i wouldn't be sharing unless specifically asked by someone eager to learn themselves.
     
  8. FinSpec

    FinSpec Member

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    Thanks for all the replies. It's pretty obvious from the board range of opinions so far that it's quite a love-hate relationship with the industry that I work in.

    Reality Cheque, the answer to your question re why managed funds are so often recommend is quite a long one, but I'll try and shorten it.

    The Financial Planning industry grew up out of the insurance industry when insurance companies started to offer investment products. All of a sudden, insurance sales people became financial planners. Since this was the basis for the industry, it's be built on top of that. Then, we have the banks and fund managers - they own a great percentage of the financial planning firms, and the conflicts there have them pushing the managed funds to the people that work there. It's in their interest to have managed funds. Also, since a managed fund is one product, it's easy to do your research on that one product and say if it's any good or not. For property, each time you buy, it's a different investment, so a firm can not have a blanket approach to research which is easier to manage and lower in risk to that company.

    Finally (well, no - not really, there are so many reasons!) most financial planners when they enter the industry start working for firms like I have just mentioned above. About 5% of planners I believe to tend to be less managed fund biased and do talk about property. That leaves 95% of the industry. If you a junior planner works at one of the firms in the 95%, then they will become a managed fund adviser as well, and the cycle starts again.

    I should also point out that if they are a commission based planner, they only get paid when they put you into something that pays a commission - therefore if they don't have a real estate license, or some way of getting paid for a real estate sale, they are just not set up to do it.

    For the record, TPFKAD, since my early 20's, I have always made more money through investments than I have by selling my time, but I love working with people and sharing with them information that can make their lives better. I actually have more real knowledge of doing it rather than certificates on the wall.

    I usually tell people to get personal when talking to their financial planner. Are they wealthy? If they are not, do they have a plan to create wealth for themselves that will see them wealthy? If your financial planner can not practice what they preach, best to get the hell out of there IMHO.

    Anyway, I could go on and on, but I won't. In reality, Im learning by reading what everyone is writing here, so thanks.
     
  9. wylie

    wylie Member

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    We specifically sought out a financial planning firm that charged a fee for time/service because we didn't want to be put into something because of the benefits to the planner. This was nearly 15 years ago and we didn't know which direction to head in regarding my planned resignation from the workforce and what to do regarding my superannuation.

    We explained in a lot of detail that we were not risk adverse, that we had a couple of IPs that were negatively geared or neutral (cannot remember really) but that we were extremely comfortable holding these IPs. We really wanted to know what to do regarding my superannuation.

    This planner, who was probably ten years younger than us, suggested we sell the IPs, pay off our housing loan and sit the spare $50K in some type of fund. I was completely gobsmacked. I would perhaps have understood that advice had we said we were not risk takers.

    Anyway, we paid for the visit, did not like their advice at all, did our own thing and have not gone back. We find our loan broker's advice has been pretty good over the years. He is very switched on, and is walking the walk and talking the talk.

    I know that when we sought out the fee for service adviser, they were very few and far between. Now I believe there are many more to choose from. I don't remember whether this adviser would have got trailing commissions or whether they were refunded to us, as I believe is the case for many advisers now??? That would, no doubt, have influenced his advice, which we believed was poor, particularly when we emphasised our risk profile.

    We will be looking for some type of advice within the next few years simply because we are heading down the slippery slope to retirement and need to know how to best maximise our superannuation, but don't feel at all confident on finding an adviser who we would trust.
     
  10. evand

    evand Member

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    A good friend of mine is financial planner and doesnt have much of a clue about direct investing.

    Prooperty knowledge = zero.
    Share market = not much more.

    He is in debt up to his eyeballs, has a modest net worth but looks a million bucks.

    He is, however, an expert at steering retirees life savings into funds. Some of which don't end up being great investments.

    He is amazed at what i do. Being an ex electrician with a bit of an idea of how to stay out of debt and invest well, actually make money and lead a great lifestyle without working.
     
  11. willair

    willair xx

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    I know several people that went down that path 10 years ago on the advice of their "FP",sold prime inner Brisbane real estate went into several managed funds,various US and Asian funds,and Australian top 20 Blue chips, if they had held those properties up till now they would be laughing now,nothing like the social consequences of the apperance of continuous
    failure with "FP"because who's money is it in the first place,that's what i can never understand why people use them in the first place the investor covers all the risk,up or down and as we have seen "WHO"been left holding the can over the past few years as the facts don't lie..
    willair..
     
  12. FinSpec

    FinSpec Member

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    I remember seeing someone quite a few years ago. Had a story which I'm sure is not unique. They saw a planner in the mid/late 90's and said that they really wanted to buy property. Their planner talked them into putting their deposit into a property FUND, and told them not to buy an IP. Fast forward about 10 years, the property fund has more then doubled in value. Whereas the property has gone up even more than that. The difference? She wanted to gear into property, not just invest a deposit. The lost opportunity is enough to make you weep.

    I'm not saying funds are bad, but as you can see, the right advice to this person would have made a six fugure difference in their life.
     
  13. steveadl

    steveadl Member

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    Hi FinSpec,

    I went to see a financial planner at the firm I use in early 2007. Filled out the survey, but told him straight up I don't mind risk.

    Came back with recommendation of a few geared MF's including the CFS Geared Share Fund. Can't remember exactly why, but I wasn't comfortable with the recommendations so held off putting any $ into MF's.

    I did however put some money my fiancée inherited into some MF's later that year in July (I couldn't come to grips with just letting it sit in a bank account!:D). We sold the majority (92%) of her holdings out at a profit 3 months later to buy a property which turned out to be very fortuitous - the funds are now down around 75% from her sale price. If we had left it in, she would have lost her property deposit.

    My overall opinion was he didn't really do anything overly special, in fact half the recommendations of funds he gave me were one's I had researched before, liked the look of, and asked him about. I had already done a bit of research into the subject, incl. gearing into them through getting a loan etc. He basically just regurgitated what I already had in mind.

    He did however also recommend I get some income/TPD insurance. Whilst I don't really need it, for the relatively small premium I figured it couldn't hurt so let him set me up with Asteron. He also set up some life insurance through super after transferring it across to his firm.
     
  14. urban cowboy

    urban cowboy Member

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    WIN Financial at West End in Brisbane are very good with property and have a number of ways for investors to get started etc. in the property market.

    Some local SS'ers will know Janeece Giraldo who runs the show there...

    http://www.winfinancial.com.au/


    They impressed me - it is hard to find FP that are passionate about property investing!
     
  15. Sheryn

    Sheryn Member

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    Update on my FP

    I sent an email to my hubby's FP 2 weeks ago...

    Just wanted to let you know we are going down the path of starting a SMSF. We saw our Accountant today.


    Rationale...

    1. Hubby received a letter for XXXX Super Personal Plus advising that the Administration Fee will be .6% of daily balance.

    2. Super money is currently invested in cash and increase of balance each week since Hubby retired with no admin fee was very low eg. just over $100 per week.

    3. We can invest HUbby's $xxx,000 at 4.3% for 4 months and receive $ 4142 into the account 3 times a year ( or $12,426 per year before costs).

    4. Above return is much better than the expected return of approximately $6,000 minus the low administration fee of $1,700 = $ 4,200.

    5. We will probably do a combination of shares, property and cash.



    A sincere THANK YOU for all help over the years XXXX.

    I have had appointments and spoken to at least 6 Financial Planners over the years from eg. First State, Bridges, Suncorp, Count, Retireinvest to name a few and you have been the only Financial Planner that spoke sense.


    Best wishes for the future.


    Kind Regards
    Sheryn

    Link to previous thread on FP's

    http://www.somersoft.com/forums/showthread.php?t=51988&highlight=Financial+planners&page=2

    My post from above thread...
    Personally, I have been through quite a few FP's Bridges, Retireinvest, First State, Telstra, Suncorp (must be getting old as I had trouble remembering the 5th one). Actually I went to a 6th one Count financial.

    Ohh then i had a discussion with a FP at my brothers wedding

    All taught me something or re-inforced my own knowledge...

    You have live on one wage and save second wage for 10 years.
    Consolidate your different super funds into one.
    One company never came back to us.
    One FP told me I was a sofisicated investor and could not offer any advise.
    One talked the same language for 2 years until I asked about SMSF and then could not offer any advise except that SMSF were lumpy, hard to manage, expensive and needed auditing each year. (although did mention if any of his clients could manage a SMSF it would be me).
    One FP had to get information out of his office waste bin twice ( as he had thrown out, out of date pamphlets out)

    Oops - just remember I took son to his FP. FP could come up with a FP for 19 year old on minimum wages.

    Yes - I have learn't because I have been open to learning.

    Come July 2009 - we will be opening a SMSF. Edit - I am a bit late SMSF started in August and should be finalised in September

    Bottom line are you always 100% happy with service or knowledge given in any industry eg retail, health, construction etc.

    Cheers
    Sheryn
     
  16. Reality Cheque

    Reality Cheque Member

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    I agree. I have quite a few managed funds because basically I don't have the time or the interest to research the share market. I've got nothing against the managed funds industry, only the planners who blindly push people that way to feather their own nests.


    Dealing with planners is like dealing with any other salesman. Look for how they are making their money and be aware of how this affects the advice they're giving you.


    Steveadl

    CFS geared share fund also returned over 50%pa for 3 consecutive years prior to the crash. Gotta take the good with the bad.


    RC
     
  17. steveadl

    steveadl Member

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    oh absolutely RC, I understand that. But speaking for my individual situation at the time and assuming he has some basic knowledge of the markets, it probably wasn't the wisest fund to recommend. Perhaps as it had already performed so well and was geared much more than other funds at a time when ASX was continually breaking records - perhaps a better recommendation would have been the same sort of Aussie/int. Share focused fund but without the added risk of the leverage. Who knows, an unleveraged fund may not have done much better, but don't think it would have done worse if were potentially looking at a down turn.

    But like I said, I also got the impression he recommended that one as I already picked it out and said I liked it. I still would have myself to blame, but I think the advice left a bit to be desired.
     
  18. Reality Cheque

    Reality Cheque Member

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    That's my point exactly. Too many planners would have you selling up IPs (or dropping the lead from the saddle bags as they call it) and piling your money into an overheated share market to increase their commisions. When in fact the best strategy may be to do the opposite.


    RC
     
  19. JIT

    JIT Member

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    I know lots of financial planners who are pro-property.

    Many of these have in-house mortgage broking, so that's one $ incentive to advise on property!

    I think it's quite clever actualy! - no need to sell property, just tell people it's a good thing to invest in and help them get finance for it and get commissions from various banks for doing so...ie. sell them loans instead!

    Unfortunately FinSpec, this may not be an option for you as you are already promoting yourself as ''commission free''!

    There are very, very few ''independent'' FP's in Aus (ie. I could count them with a few fingers), and even those ones have their own biases.

    Further, I've found that their fee-for-service arrangements can at times be a bit pricey... perhaps as they lack the background commission-based income stream?

    FinSpec, what's your take on active managed funds vs passive index funds?

    Do you advice some clients to invest in active managed funds?

    If so, why?

    FWIW, I think FP's can be very worthwhile, but you just need to find the right one, know what questions to ask, and understand what their ''biases'' are... unfortunately though, 99% of the general public have no hope of doing this!
     
    Last edited: 3rd Sep, 2009
  20. kissfan

    kissfan Member

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    Hi FinSpec.

    I'd also like to hear your view on LIC's such as Argo , AFI etc compared to mgd funds.

    Regards
    Marty