GREAT ARTICLE…….
an e-mail i recieved, thought provoking anyway..what do you think?
Real estate, unlike other major investment classes, is generally not regulated by authorities such as ASIC.
Unlike what is expected of a licensed investment adviser, there is not really any legal obligation for a real estate salesman to make sure that the advice given is appropriate to my clients’ needs and that the client’s risk and the salesman’s remuneration is adequately disclosed.
Very very few real estate agents are licensed investment advisers. Real estate is a sales profession in the same way as selling cars. There are honest and hard working salesmen out there (both in real estate and autos), but your legal protection is minimal and extends only as far as protecting you from really dodgy stuff with the Trade Practices Act and similar legislation.
Because most real estate agents are not licensed investment advisers monitored and audited by ASIC, they are not really obliged to ensure that advice is suitable for you in the same way that a good financial planner does.
What passes for investment advice in real estate is usually a sales pitch. (I believe the same can be said of many financial planners, but real estate people take irresponsible advice giving to a higher plane).
In this article I am referring to real estate “salesmen” and “advisors” instead of merely agents. While I am no fan of real estate agents in general I am even less of a fan of real estate people that aren’t even agents.
Most guys in the real estate wealth building crowd aren’t even licensed real estate agents, they are essentially unqualified marketers. This is an example of the regulation of this industry, you can’t go around teaching people about shares without being a licensed adviser, but you can put on a “future millionaires seminar” to a packed audience even if you know nothing about real world property investing and have a criminal record for fraud and multiple bankruptcies.
Real estate agents are pretty bad as a group, but many really high profile property marketers aren’t even real agents! ASIC would never put up with this with shares, futures or managed funds, but it is tolerated in property to a large extent, which is one reason why most of the dodgy seminars talk about property.
If you want some idea of what I am talking about, go to two seminars. One seminar should be given by a good financial planner or a reputable organisation like a university or the Australian Stock Exchange, and the other one of those presentations where they talk about negative gearing and wealth building and tell you to buy property. The differences are astonishing.
Financial planners talk about diversified portfolios constructed from investments in every asset class. Real estate marketers recommend you only buy real estate, and will go to great lengths to remind you of the crash of 1987 and dismiss shares as risky and speculative. Real estate salesmen say that property is a high return low risk investment and is a virtually guaranteed way to build wealth.
Financial planners recommend different portfolio mixes for different clients, depending on personal circumstances, prior knowledge and experience in the markets and psychological risk tolerance.
Real estate salesmen generally claim that property is virtually nil risk and recommend you borrow to the hilt, drawing on your home equity then getting as much money from the bank as they will lend you. In a year’s time they recommend you draw out any more equity you have built up in your home and your investment property to buy another one, and so on and so forth until you own a huge portfolio made entirely of investment properties.
Financial planners are supposed to design an overall strategy that includes every aspect of personal finance. Real estate salesmen only fact finding is oriented to seeing how much property they can sell you.
Financial planners talk about wealth building in a tax efficient manner, real estate salesmen talk about reducing your tax via negative gearing and depreciation.
Financial planners are obliged to disclose their fees, soft dollar benefits and other conflicts of interest. Real estate salesmen are given no such obligations, they supposedly work for the seller and not the buyer.
Because real estate is not regulated by ASIC, this is the most dodgy sector this side of speculative futures trading.
Gurus come to town and play to packed audiences teaching them the “secret” techniques of wealth building, including “nothing down” real estate strategies in particular, but also a bunch of imaginative stuff about buying property for cents in the dollar from “motivated sellers”, buying property with vendor finance and lease options.
The vast majority of the advice given at these seminars is false and misleading, but ASIC doesn’t have jurisdiction, only Fair Trading – and they are extremely slow acting. If a licensed investment adviser got up and started telling people to borrow to the hilt to buy any other investment (including property trusts), he would be banned for life, but not a real estate promoter.
Real estate gurus say that property is immensely profitable and perfectly safe not because it is true, but because they can get away with saying this. There is no mechanism to stop real estate gurus from saying misleading things about real estate, in particular residential, because residential real estate is not a fully regulated asset class.
REDWING“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorThere are a number of important points here. Firtly it is important to understand that a Real Estate agent works for there client the Vendor. Therefore if you ask a Real Estate Agent how much a property will sell for then they will try to get you to pay as much as possible. That is there job. It is a matter of understanding the rules. What I find more interesting is that financial advisors who work under ASIC guidelines in many cases recieve commissions from products they sell. You have to ask the question how unbiased are these people. If you are going to see a financial advisor you are better to pay them a fee for a plan and make sure that the products that they are recommending are not commissioned based. In terms of marketing companies even where these companies have licences, and many also have financial planning licences attached many of the sales people do not even have an agents representative licence. The rules are simple if you attend a seminar and the company is selling a product where they are recieving a commission they are not working for you. If you want to purchase an investment property use a buyers advocate that has experience like Michael Yardneys company or mine. Otherwise do you own research. Most people get ripped off because they take someone elses word. It is your money, be sure what you are doing with it.
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
service and seminarsNigel Kibel | Property Know How
http://propertyknowhow.com.au
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I agree with most of what you say as well Nigel, in my case I trust the majority of Financial Advisors about as far as I could throw them..
As I expect would most people, thats why there has been the big *push* some years ago to clean up the Industry..
Most people nowadays prefer to check it out themselves before entering into anything, after all,as you say it’s “Your Money”.
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI have a simple rule that has never let me down.
I simply don’t believe anything a real estate agent tells me. I only make decisions based on information that I have verified independantly.
I’m saying they lie …..I just can’t recall a single piece of information that an agent has given me that has turned out to be true.
I agree to a point Nat
Part of the problem is that Real Estate Agents are confined to a small area it all they know. It would not matter where I went if I said to an agent that I wanted to buy an investment property they would not say that this is not a good area to invest they would say have I got the deal for you. I understand this because I was a Real Estate agent in Melbourne working in my own business. Since I have gone more into the training and research side of the business I have learned more in the last three to four years than I learnt in the previous 15. That is becuase you start to review the market on a much larger scale. If I am research a property for a client I tell them that they should question everthing that I am saying because it is there money. Most agent sell Residential real estate and do not fully understand property investment. Do you own research and never take anyones so called suggestions if they have a vested interestNigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
service and seminarsNigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Most real estate advisors are not agents and they
DO NOT NEED TO BEThey are INVESTORS
I personally would prefer to sit down and listen to a financially free investor than a sales person struggling in a job.
If the investor’s strategies dont meet your own goals and plans then dont take them on board
Going into seminars without a plan and an investment strategy and waiting for someone to spoon feed you and tell you step by step what to do is a recipe for disaster. and in this case you are you own big risk!!!
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582DrX..
I’m pretty much of the opinion..listen to everyone, absorb what is useful and discard the rest..
(useful to me that is)
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorAGREED
to absorb what is usefull however, you need to have your own plans and implement the strategies that others are preaching.
Otherwise consider yourself having a very intersting hobby and not a business.
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582When then does a hobby become a business?
I Remember somebody in a movie saying that they had a hobby..they collected businesses…
I did like Robert Kiyosaki’s idea of “Mind your own Businessâ€, I work for an Income; I also enjoy my work; However, I see Real Estate as being “my business†(and getting bigger) I’ve certainly made more over the last few years in Real Estate than I ever would have saving 10% or more of my wage..
As for my strategy; it’s “ever evolving†as I learn more and more from other Investors with experience and knowledge differing from my own. I prefer long term investments and look forward to one day learning a bit more about developing and commercial/industrial properties.
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorTHINGS ARE CHANGING!
Last year a senate subcomitte recommeded that people giving property investment advice be regulated.
Their suggestion was to bring them under the Financial Services Reform Act and have them regulated like financial planners.
They recognised that a real estate agents license is NOT enough to enable you to give property invetsment advice.
And as has been clearly explained in this post, you don’t even need to have an agent’s license to present seminars or give “property investment advice.”
I welcome the recommendations as they will stop the next generation of Henry Kaye’s.
But they may also stop the good guys like Steve McKignt because even though he is an accountant, this is not an accepatable credential for property advice.
I have become a foundation member of the PIAA (Property Investment Advisors Association) and have put my name down for the new course to be run by Deakin University in property investment advice, which may become the new standard required to give advice or get up and present.
Times are changing
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.auA couple of years ago everyone was really hot on the property bandwagon. Now it seems the lustre has gone off this form of investing and accordingly those who work assisting others to achieve their goals whether via property investing, stocks, shares, cash, international markets….whatever, have now got more time to think on how they generate their personal income and contemplate the future.
As Michael has taken the step with the new Deakin uni course, many others, like myself see the broadening umbrella of ASIC and have been advised to become financial planners to be able to give advice on several investing product ranges.
I personally was amazed that within the guidelines of the financial planning course, only 20 minutes were dedicated to cover “direct property” as opposed to “property trusts”. This left me shocked as to how little focus any financial planner would have on one of the most successful investment modes.
However having completed hours on estate planning, superannuation, insurances, fixed interest products, managed funds etc etc. All I’m seeing from the structured financial planning models promoted via an ASIC certification, is a glorified insurance salesman or mortgage broker with the backing of a large institution to base his selling off.
An AMP or Mac Bank advisor(examples only) would not be truly independant due to the limited product ranges by their “licence” they would have available for their clients. To say an AMP guy would recommend a Westpac or MLC product which may be the best for a particular clients needs is laughable.
So ok, lets all go off and get this or that certification to appease those nervous investors that need these criteria before they will look favourably at what we promote in this industry. Let however, those that believe good ethics, a bloody good knowledge of the investing markets we advise on, and dont need a dose of credibility from another piece of paper on the wall, to do what we do well.
We dont snub those that have 4 or 5 qualifications in an industry, but rather let them spend endless years in courses and be happy, whilst others base their advice on hours on the ground doing, rather than reading, about markets.
I am a financial planner via an approved course, this was to make others happy and more confident to deal with my services, not getting any further knowledge than from my previous occupations of stockbroker, currency dealer, and insurance seller, Cordell building publications targetted to the building industry, GKN Light access, etc etc.
All of these “past lives” have given me the good grounding in finance and the building industry, far exceeding anything I learnt on any course.
All im saying is that we all approach the same market with different knowledge and experience to start with so our perceptions and approaches will also differ drastically.
Lets be honest, someone that has done an inhouse Westpac(example only) course would have no possible way of knowing the full range of whats out there to invest in. Will accurately do a fact finding and send it off to a para planner, get the info back and base his recommendations on a summary created by a planner that does profiles daily, and advise people about their future with no consience whatsoever. All the while getting signatures from the client to sign of at this stage or that stage to comlpy with auditing.
It doesnt fill me with any warm or fuzzy feeling about parting with my hard earned money to any run of the mill financial planner either.
My focus is property, and if thats too hard for some, thats cool, use those “professionals” you feel comfortable with.
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!DD-
The Financial Planners I met at the Destiny Group in Perth were “Tier 2 Financial Planners”Which they said was “Property” ???
Are you able to shed any light?
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculator
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