Financial Planners & Property

[wylie]

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!

I agree with this. My parents are seeing a chap from RetireInvest right now who is steering them towards asset protection. The fee is not cheap, but he knows what he is doing, works through different scenarios, has done a LOT of work on their issues, and just really impresses me.

For his upfront fee, they can see him as often as they feel the need, he keeps in touch with them and follows up on their plans, keeps them on track, and we will probably seek him out when time comes to get the best from our super and to best organise our affairs towards retirement.

 

[deejay]

This is interesting for me because I'm considering moving into financial planning, as an evenings/weekends thing in the next year or so, transitioning into longer hours when I retire out of full time corporate world. I think a lot of the experiences and preconceptions expressed here (and many of them valid - I've had poor financial planners too) will be very useful in terms of how I position and structure myself.

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.

Not so sure about that. Many of us are still in some kind of day job or business in order to either service properties that are not yet positive, maintain servicability for more properties, or supporting ourselves while the properties reach a point where they can support us fully. It doesn't necessarily mean that we're bad investors.

 

[FinSpec]

Loving this discussion, it's really great to hear all the different views. To answer a few points that have been brought up:

- JIT, Active vs Passive? It all comes down to value at the end of the day and a good understanding of who is actually looking after the money. I find that a lot of active managers, once you take out the fees and the terrible tax treatment actually destroy value compared to just the index - but the extra fees you pay do go a long way to market what they do so they can get more money off people. That being said, if you have a good tax structure, then active can be, sometimes, better. There are many options out there, and slowly, the active managers are losing market share. Do I advise on active funds? I will use them when there is a NEED for them - not by default.
On the commission free bit, it's actually quite easy. Sometimes, when we do something for a client, we actually can't avoid a commission. In that case, the money goes back to our client so they get a little extra in their pocket, and this helps them to actually pay for the cost of having us here. So generally, we get paid for what we do.

-Marty, LIC's? LIC's are a good idea, however you do run the risk of having an additional market risk on top of your market risk. The ASX actually reports regularly on the NTA's of LIC's vs their market capitalisation, and often we can see discounts or overvaluations of up to 20%, however 10% is more common. This is ok if it's a historical discount that you're always going to have, but there is some history there of a premium turning to a discount because people have lost faith with the manager. If people think that the manger is going to do a great job, then you may see a premium becuase people like to buy outperformance, and it shows in a listed environment. If you like the idea of being listed, there are listed index funds now which are priced at the market, so no discount or premium.

-Deejay - getting into planning? It's a really rewarding job when you're making a positive difference to peoples lives, but it's also challenging. Just make sure that you deliver what you promise. There is nothing wrong with a planner who knows a lot on how to make money, but isn't there yet - as long as they are putting their own words into actions. Seriously, would go do a doctor that was overweight, smokes, had dirty hands and had was coughing and spluttering all over the place?

 

[The Y-man]

Seriously, would go do a doctor that was overweight, smokes, had dirty hands and had was coughing and spluttering all over the place?

Well.....actually, I believe there is at least one cardiothoracic surgeon that smoke a least a pack a day....

Cheers,

The Y-man

 

[Dazz]

Not so sure about that. Many of us are still in some kind of day job or business in order to either service properties that are not yet positive, maintain servicability for more properties, or supporting ourselves while the properties reach a point where they can support us fully. It doesn't necessarily mean that we're bad investors.

I'm very sure about what Blue Card said.


IMO what it definitely does mean is that ;

a) You haven't been investing long enough or hard enough.

b) The assets you have chosen are not very good - IN COMPARISON TO OTHER....BETTER INVESTMENTS.


No, it doesn't mean you are bad investors.....but it does mean you are still far too green and far too poor.....let's be blunt for a moment....to be adequately "advising" other folk and charging for the privilege on financial matters.


I'm sure Blue Card will pop back and clarify what he meant by his comments if I've got it totally wrong.

 

[deejay]

IMO what it definitely does mean is that ;

a) You haven't been investing long enough or hard enough.

b) The assets you have chosen are not very good - IN COMPARISON TO OTHER....BETTER INVESTMENTS.


No, it doesn't mean you are bad investors.....but it does mean you are still far too green and far too poor.....let's be blunt for a moment....to be adequately "advising" other folk and charging for the privilege on financial matters.

I think that's extremely simplistic. You seem to be suggesting that no one should advise anyone else about finances unless they're independently wealthy and no longer need to work. In which case no one would advise anyone, and a lot of people not currently investing or insuring at all would never invest or insure. How does that serve the economy or any individual?

 

[Dazz]

I'm a pretty simple and basic kinda guy, I deal with hairy a$$ed truck drivers and panel beaters on a daily basis - so that sounds about right.

When you are on level 4 of a 10 step ladder, I think it quite foolish to be taking the advice of someone on level 2 or 3.

One should be taking advice from someone on say level 5 or 6, someone who has recently been through the exercise and clearly been successful.

At the same time, quite useless talking to someone on level 8 or 9 when you are on level 4, for they will be using different techniques and strategies that a level 4 couldn't possibly emulate, and probably would of forgotten the nitty gritty details of what it took to step up from level 4 to 5.

Most highly qualified professional FA's seem to me to be on about level 2 or 3, and therefore are quite useless for most experienced investors. Have a squizz of the comments thus far.

For the vast bulk of the population still at level 1 and 2, they must seem enormously valuable to speak with.

 

[coastymike]

reminds me of that infamous quote "Wall Street is the only place in the world where people drive to in a Rolls Royce to take advice from people who catch the subway"

 

[deejay]

When you are on level 4 of a 10 step ladder, I think it quite foolish to be taking the advice of someone on level 2 or 3.

One should be taking advice from someone on say level 5 or 6, someone who has recently been through the exercise and clearly been successful.

At the same time, quite useless talking to someone on level 8 or 9 when you are on level 4, for they will be using different techniques and strategies that a level 4 couldn't possibly emulate, and probably would of forgotten the nitty gritty details of what it took to step up from level 4 to 5.

Most highly qualified professional FA's seem to me to be on about level 2 or 3, and therefore are quite useless for most experienced investors. Have a squizz of the comments thus far.

I quite agree with all of this. In a perfect world, a FA would have the insight to know when an investor is too mature for what they offer and be able to refer on, but self-interest will prevent this usually.

I'd be interested to know how you would divide up the tiers. I don't know if I would even call a FA who recommends managed funds for everyone a 2, personally. If you don't know how to tailor a plan to a person's risk profile and goals, you're not even on the ladder IMO.

 

[FinSpec]

I think that TPFKAD has a point. I love the idea of mentors - and so many of my friends are a lot older than me - becuase they always have a good story to tell and I learn a lot off them. If you talk to someone way too ahead of you, there is a bit of a gap however.

About taking advice from people that are not as wealth as you? Well, it can actually work. Sometimes, when you're at level 2, you actually know all the steps between level 2 and 5, you just need to time to get there. I advise people that are a lot wealthier than me, but then many of them have been at it longer than I have - but I have a skillset that they don't have, and as a result, I add value. I would say that over the years, I would have been in a situation where I was better off than about 60% of the people that advised to - the 40% that were wealthier, however, I could add value in specific areas and help them to manage their affairs.

Don't see anything wrong with recommending managed funds, as and when they are actually called for - but NOT as you default investment option. I personally believe that if you can buy direct, and do a good job at it, you're better off.

coastymike - love your quote, I've heard that often before, and it's very very true. I remember working with a "Financial Planner" years ago that used to jump the barriers at the train station - becuase he could not afford a ticket... that was a worry

 

[wylie]

I have always thought it strange that some people here on SS say that a financial planner should not be advising unless he is already wealthy. Probably the same ones who have said that real estate agents should have lots of investment houses.

Does it follow that someone working at the mint or the treasury should have gold bullion stashed in a safe deposit box.

Working as a planner is just another job, like working as a real estate agent, or working in a bank or printing bank notes. Some will do well and make money, and others will spend up to their income, just like many people who are butchers, bakers and candlestick makers.

 

[Dazz]

I have always thought it strange that some people here on SS say that a financial planner should not be advising unless he is already wealthy.

Doesn't make sense to me - but then you and I never agree on anything so it's expected.

On what basis do FA's advise other people on financial matters if they are poor ?? A certificate on the wall doesn't cut it for me.

One doesn't expect a candlemaker to be wealthy, but one does expect them to be bl00dy good at making candles, far better than a butcher or baker.

 

[deejay]

...Probably the same ones who have said that real estate agents should have lots of investment houses.

I think this one is interesting. I don't necessarily think real estate agents need to have lots of investment houses, but I think they need to know what people look for in investment houses (and PPORs). In my town, the successful agents have a sensible view of a property's yield, price accordingly, encourage vendors to do any minor jobs that might turn investors off, get good photos done, and play up any future develoment possibilities such as rear lane access that might lend itself to self-contained flats. The unsuccessful ones don't.

Same with the property managers - the good ones understand why you might want a depreciation schedule before June 30 and help get someone in to do it, understands the sorts of problems that might come up due to landlord insurance clauses, and can direct you to property-savvy accountants and good tradies. You don't necessarily have to have done it, but you have to know what your market needs and be able to supply it. Edited to add:We fired a property manger who stuffed up getting a depreciation schedule before the end of last FY.

One thing I'll need to get across if I do move into financial planning is things available to farmers (eg grants, concessions, primary producers benefits with Centrelink). I'll never be a farmer, but you need to know your customer.

 

[wylie]

I think this one is interesting. I don't necessarily think real estate agents need to have lots of investment houses, but I think they need to know what people look for in investment houses (and PPORs).

Agree with this. But it has been said here before that some people cannot take seriously a real estate agent without IPs .

Must chiropractors have fabulous spines?

 

[FinSpec]

I think that there is a different feeling to a real estate agent vs a financial planner. You go to a real estate agent when you want to buy or sell a property - once you're there, you've pretty much made up your mind that you're there to buy.

With a financial planner, you go to them for advice on what do with your money, and to a certain extent, I think it makes sense to have a feeling that you're talking to someone that really knows what they're doing. I could buy a property off an agent that has no property at all, honestly I don't care - I'm there to buy the house, not the agent. I was talking to an agent the other day who has rennovated over 20 houses and has done very well for himself - now I would get ADVICE off that guy as well as buy a property.

You can go to a financial planner to get a specific piece of information, such as how to protect assets, to insure yourself, superannuation questions etc, and it will not really matter if they are wealthy or not - as long as they know the technicalities better than you do. But if you go to one to help with a wealth creation strategy, I think it would be really interesting to hear what they are doing for themselves - do they practice what they preach? Or is it a case of "this is what I have read that you should do, or this is what I have been told to do with you becuase that is what I'm told to do". You don't want to have a conversation that goes like this:

"I think you should buy this fund"

"Great, thanks, here's your cheque - by the way, where do you put your money?"

"Oh, I buy property becuase it makes more money, but here, buy this fund - it's great"

You would buy a pair of shoes off anyone if you liked the shoes, but you wouldn't take fashion advice off someone that can't dress.

 

[deejay]

You don't want to have a conversation that goes like this:

"I think you should buy this fund"

"Great, thanks, here's your cheque - by the way, where do you put your money?"

"Oh, I buy property becuase it makes more money, but here, buy this fund - it's great"

See, that wouldn't bother me...as long as it was followed by, "...because this fund is a better match for your timelines and risk profile."

 

[pully]

re planners and property.
our planner always said he could not recommend something unless he had seen research specific to that fund/super etc?

basically re our investment properties he would record annual figures etc, but would say eventually our exit plan would be to sell up, gradually to minimise CGT and put proceeds into super.

he did not take much interest in the property side of our affairs. he concentrated his advice on the managed funds and super.
our direct shares were also considered separately.

so it was all a bit fragmented but we were diversified. still are but our relationship with him ended after many years because he was made redundent.

re the idea that what is good for the planner and their money, is good for their customers?

i disagree, because what might be suitable and appropriate for a customer who for example is a retiree, maybe not for the planner who might be at a different stage of life? just a few thoughts.

 

[wylie]

You can go to a financial planner to get a specific piece of information, such as how to protect assets, to insure yourself, superannuation questions etc, and it will not really matter if they are wealthy or not - as long as they know the technicalities better than you do.

This is what I was trying to say, but you said it better .

But if you go to one to help with a wealth creation strategy, I think it would be really interesting to hear what they are doing for themselves - do they practice what they preach?

I would not go to a financial planner for advice on wealth creation, but to get advice about the rules, regulations and traps of superannuation, capital gains tax implications on "when" to sell a property or "when" to finish up work to minimise tax etc. Someone who knows more than me on these things would be what I am searching for, and I couldn't care if they are only 24 years old and fresh out of financial planning school, or well along their own journey to wealth.

We have forged our own path to wealth, and need specific advice about things that they know more about than us.

And it wouldn't have to be a financial planner. Our accountant and mortgage broker both have a place in our future planning as well.

 

[cu@thetop]

Agree with this. But it has been said here before that some people cannot take seriously a real estate agent without IPs .

Must chiropractors have fabulous spines?

I don't want to deal with a REA with investment properties- he or she will have already taken the best deals for themselves.

 

[FinSpec]

i disagree, because what might be suitable and appropriate for a customer who for example is a retiree, maybe not for the planner who might be at a different stage of life? just a few thoughts.

I do stand corrected, I think you're right in the way that you're looking at it. The direction I was coming from was more from a like for like situation. I have had some younger just getting started clients come in over the years, and they have enough to buy a property, they already have some shares, and are confused becuase the planners that they have been seeing have told them to steer clear from property - "here is a fund for you instead" type of situation. Obviously, someone on an aggressive path to building wealth is going to be doing something completely different to a retiree who has already amassed sufficient wealth to live off.

I diversify between shares and property as personal circumstances and opportunity permits - however I know that if I was working for certain financial planning organisations, I would not be able to recommend a property, even if I knew that it was the right thing to do. I've met a LOT of planners that are really frustrated by this issue.