Shady Advice versus the Right Advice

Not financial advisors

Many people, when they think of obtaining advice, turn to financial planners/financial advisors. Let’s bust the myth that they can help you with specific property research, property sourcing, and sound advice.

The financial planning industry deals with investment products (securities). Currently, the Australian Securities and Exchange Commission – ASIC – does not recognise property as an investment security, although, more recently (as of late 2013), property in an SMSF (self-managed super fund) is a financial product.

ASIC (an independent Commonwealth Government body) contribute to the wellbeing and reputation of the Australian economy, helping investors become more informed and confident by ensuring fairness and transparency in Australia’s financial markets. Their responsibility includes enforcing and giving effect to the law, making information available to the public on companies and other bodies.

Generally, financial advisor licensing requirements do not permit them to provide specific property advice, or provide product. A good financial planner will generally provide advice on asset allocation of funds, of which a proportion may be allocated to property.

Shares, Managed Funds, Superannuation structures and insurance are predominately the main examples of what ASIC regulates and what financial planners may be able to advise on. It does not include typically include specific property, nor does it include credit advice like mortgages.

The bigger issue for advisors is they have not traditionally been able to obtain professional indemnity insurance, to advise on specific property. They need to advise on it as an asset class but, under their financial planning licence, they cannot typically provide specific advice on specific property. At the time of writing this, there are only two education firms in Australia that have attained professional indemnity insurance for property advice.

Most financial advisors work for institutions, and they are often governing what their advisors offer you, by way of the product they recommend. They conveniently (and typically) recommend their own institutionally-owned products. A bit like a bank, they may only offer you their own products. This may severely limit both you and what you actually need.

Some financial planners give the industry a bad name. They receive kickbacks from developers by passing their client over to buy a property. These are often, if not always, undisclosed. We are talking about amounts of 2%+, plus additional incentives (such as an extra 1%, or bonuses) for certain projects.

Unlike regulated industries such as accounting and financial planning, working for a property marketing company (as distinct from operating as a traditional real estate agent), does not require a great deal of education, experience, or study prowess.  Marketing investment property, put simply, requires nothing really but the ability to sell, and this is meant to be a wake-up call and warning!

Literally anyone can be involved in property, which has resulted in there being many predators in the field. The property market has also attracted highly ethical people, and they are very professional. With so much noise and distraction everywhere, it is (all too often) difficult to spot the difference between the good and the bad.

There is no representative body to which the ethical property professionals can belong.

There are really only two organisations that are trying to lead change in the industry. However, at the time of writing, there is only one organisation’s training syllabus – that being PIAA (Property Investment Association of Australia) – that is recognised as adequately suitable, in the insurer’s eyes, for their advisors to be eligible for professional indemnity insurance. PI insurance is reasonably easy to obtain in some industries as simple sometimes as just buying it, if you have a small amount of money and some basics in place. Why having PI insurance is so different in the property industry and why it is so very important to only deal with someone that has it is because you cannot simply buy it off the rack as it were There is really only one type of model of operation we must adhere to be eligible and entitled to receive it.

The quality of their structure and information provides property advisors with the framework that addresses several key points (which any regulated industry requires), and in my opinion and experience, this sets the benchmark as to what is required for the property industry to become regulated.

PIAA is independent and not-for-profit. It has a trademarked logo for consumer recognition, and annual dues go toward Government lobbying, and to advisor training and services.

The fundamental backbone of any regulated industry should follow these key points:

  • Barrier of Entry – Advisors must complete the PIAA Property Advisor Course, complete either a NSW Agents’ Representative Course, or the full course, to obtain a full license as a real estate agent (equivalent to what is required to work as a real estate agent.)
  • Adherence to a code of conduct, and commitment to appropriate transparency of any vested interest, commissions, or conflicts of interest.
  • Provision of professional indemnity insurance
  • See that complaints procedures are managed by members
  • Inclusion of a model designed to encourage and allow industry participation, and develop greater levels of professionalism (rather than a model designed simply to enforce compliance.)

‘It meets a number of issues raised by the Consumer Protection Laws and also by the Joint Parliamentary Committee.’ – PIAA

Participants of the Property Investment Association of Australia Course must also have attained RG146, otherwise known as the Diploma in Financial Services (Financial Planning). This makes them qualified as a financial planner as well.

Andrew Crossley

Andrew Crossley from Australian Property Advisory Group is a qualified Property Advisor and Property Advocate with over  20 years’ experience in wealth management, property and finance both here and internationally working in Private Banking in Austria, Italy, Netherlands, UK, and the Cayman Islands.

Although Andrew has grown his personal property portfolio to 11 properties and just under 4 million, it is his balanced and risk managed approach to his properties that was recognised in the ‘Your Investment Property’ magazine where he was recognised in the 2012 Property Investor of the year Awards, placing him 5th overall in Australia.

He has conducted several seminars on Property; Wealth Creation through Property and Self- Managed Super Fund lending.
Andrew is also on the Forrester Cohen National panel of certified Property Advisors. Andrew has recently been asked to become a contributor to the “Your Investment Property” Magazine, Smart Property Investor Blog, The Advisor, and Money Magazine on the topics of lending and property.

Andrew has also contributed to Terry Ryder’s quarterly report, (Terry being Australia’s foremost respected location hotspot analyst), and he is also referred business from Money magazine.

His Qualifications include:

  • Accredited Property Investment Advisor through Property Investors Association of Australia
  • A Licensed Real Estate Agent (NSW and VIC)
  • Has a Diploma in Financial Services (Financial Planning) making him a qualified Financial Planner.
  • A Diploma in Financial Services (Finance/Mortgage Broking Management) qualifying him as a Mortgage Broker.
  • He is 2 subjects away from his CPA
  • He has an MBA
  • A Masters degree in Commerce
  • A Masters degree in Commercial Law
  • And is a Justice of the Peace.

Andrew’s Book “Property Investing Made Simple is available for you to download today, Andrew’s book is now officially an international # 1 AMAZON BEST SELLER.

This is an extract from a chapter in the book Property Investment Australia. Available from Mithra Publishing.

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