Property advice gap leaves clients vulnerable to spruikers

With new options available to treat residential property as an advisable asset class, advisers should be looking to add it to their product range for clients rather than risk clients being seduced by spruikers, according to a fractional property investment firm.

Addressing ifa’s Business Strategy Day in Sydney on Tuesday, DomaCom chief executive Arthur Naoumidis said with the onset of fractional property as an asset class, advisers no longer had to exclude property advice from their services and potentially risk clients losing a large chunk of money to unsavoury property spruikers.

“From a risk perspective, if you don’t provide a solution, someone is. Most advisers I’ve spoken to have experiences like this, where their client was invited to the Pullman lounge on a Thursday night, plied with alcohol and nice sales brochures and the next thing you know they’re the proud owner of an apartment in Yeppoon,” Mr Nauomidis said.

“The money from that property purchase has to come from somewhere and generally it’s come from the portfolio managed by you, and they’ve put all of it into the one asset and leveraged it five times, which you wouldn’t do for any other asset class. 

“Historically advisers have just said ‘well I can’t advise on residential property’, but now it is an actual asset class you can advise on and there are solutions for the property selection, which is very similar to what happens with equities.”

Mr Naoumidis said the group’s fractional offering, which had an ASIC product disclosure statement making it a fully advisable investment product, could also be used to bring new client generations into the fold.

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“At the end of the day if you don’t have a strategy to engage [your clients’] children, that is going to impact the valuation of your business, because anyone who is going to look to buy your business is going to look at how sticky the FUM is, not how sticky the client is because eventually they’ll pass away,” he said. 

“It’s about whether you have a relationship with the next generation, and there is one asset class that spans all the generations and that's property.”

He explained that the group’s rent to buy offering could be used to allow Millennial-age clients to gradually buy into the property market, while its senior equity release product could be used to fund Baby Boomer aged care or Millennial property purchases while giving Generation X clients with SMSFs a healthy income.

“You’ve got a whole three level strategy using property as the core between all three generations, because they either have property or want it or can fund the equity release,” Mr Naoumidis said.

Property advice gap leaves clients vulnerable to spruikers
Arthur Naoumidis
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