The questionnaire produced by ifa sister title Smart Property Investment and industry body Property Investment Professionals of Australia (PIPA) – which canvassed 627 investors – found 86.9 per cent of respondents believe people who recommend property investments should require a licence.
However, despite the call for a more regulated adviser, only 27 per cent of respondents had ever visited a licensed financial planner, the results showed.
PIPA chair Ben Kingsley told ifa that property investors wanted regulated advice but believed most financial advisers could not meet their needs.
“They don’t study it as part of their course content, it’s not a product they can sell under their professional indemnity insurances and it’s a product they are steered away from by their dealership groups,” he said.
He called for investment properties to be regulated like any other financial product.
“We would think it would fall under the Corporations Act as a licenced investment product, based on the determination of the purchase,” he said.
At least two dealer group executives spoken to by ifa agree with Mr Kingsley that direct property advice is a major missed opportunity for many advisers.
Spring Financial Group founder Keith Cullen said there was a mismatch between the demand for professional property advice and the expertise of advisers.
“It defies logic to me that we have a $1 trillion-plus investment market in residential investment property, we have 1.75 million Australians that own around 2.75 million investment properties, yet it seems that less than 10 per cent of advisers specialise in or give professional advice around that asset class,” he said.
He suggested it would be a mistake to think that investors are not interested in seeking professional help with their finances.
“In their hundreds of thousands, they’re doing Google searches on various topics every month looking for advice. Yet where do they find it?” he said.
Meanwhile, Omniwealth chief executive Aaron Greaves suggested consumer demand would eventually encourage more advisers to offer property services.
“Your average client is just going to demand that their advisers be abreast of lending strategies, property advice, superannuation, insurance and the whole lot,” he said.
“If you’ve got an adviser who is just out there talking about asset allocation, either inside or outside super and managed fund portfolios, I think those advisers are going to struggle to get clients, going forward.”
Hi Wayne, in my experience I’d say 95% of property advisers are using property as a front to get clients in as much debt as possible to profit from property or loan commissions. They commonly describe shares as risky, and underplay the risk of highly leveraged property portfolios, thus appealing to the natural tendency of people to think of property as a “safe” investment class, and equity in property is only to be used to leverage into the next property purchase.
People are very rarely encouraged to seek diversification in their portfolios, or assess the actual high level of risks they are taking by gearing to the eyeballs (or pay down any debt at all) on their properties.
Nothing wrong with property as an investment in the mix, but the property advisers are mostly just in it to sell some sort of product….kind of like a lot of advisers flogging product on commission.
Truly independent advice on every stage of a client’s property journey has been available for years. Sadly, the vast majority of advisers I’ve directly approached on this matter consciously choose to ignore the need, and opportunity – as clearly identified above.
However, I’m encouraged by the comments suggesting that client demand will eventually overwhelm the high wall of adviser disinterest.
It will be a win/ win/ for all.
As Advisers I accept that we are not necessarily the best placed to provide advice around whether or not x property is better than y however it isn’t always a great client outcome to identify the benefit of introducing property to their inv portfolio and stopping the conversation there…
Perhaps there is scope to constructively regulate advice under a specialised licence arrangement
Most financial planners have dodged a massive bullet by not advising on property. When the bubble eventually bursts, the wealth destruction will be incredible. Investors will be baying for blood from whoever gave them the crazy advice to put all their savings and borrowing capacity into one single asset.
Couldn’t agree more with Ben, Keith and Aaron. By not either providing or facilitating advice on property, advisers are not only missing a valuable income stream in their business but they may be, unintentionally, driving their clients into the hands of unscrupulous operators and exposing them to unnecessary risk by acquiring inappropriate and/or overpriced property, overweighting their portfolio, increasing debt to unacceptably high levels. I’ve heard of advisers losing clients who have bought an investment property because the client liquidates their other investments to help pay for the property, leaving the adviser with nothing to service.