Building a reliable financial team is one of the keys to success in property investment, but is there such a thing as “too much mentors and advisers”?
According to Smart Property Investment’s Phil Tarrant and Rich Harvey of Propertybuyer, the members of an investor’s personal financial team depends on his goals and the strategy he’s willing to use to achieve these goals.
Phil said: “I highly recommend that you get educated about the people who can help you with advice, but you need to understand how advisers can help you. So if you’re looking for a wealth creation strategy, a wealth creation goal, you need to speak to advisers around that. That might be your financial adviser, it might be a really good accountant. Obviously, buyer’s agents will help you along that path as well.”
“The other thing your adviser should do, the financial adviser, is to get your insurances right. So income protection, life trauma, TPD, those kinds of things. A lot of people forget to do that. They might get a whole portfolio of 10 properties, not insure their income, and that’s the thing that’s keeping the whole thing going you know,” Rich added.
Ultimately, all members of the financial team must work together to grow and protect the investor’s hard-earned wealth and help him attain financial freedom and stability by providing good assistance and excellent advice.
Rich continued: “I personally use a financial adviser. Even at my stage, I think it’s absolutely critical because as I said before, I don’t know what I don’t know. I use a financial adviser for a couple of reasons: one, to keep me on track; two, they keep me accountable; and they look at each investment that I make. I want to get toward a goal of financial independence, and what that adviser does is, they’re like a board of directors, they’re there to help you make decisions and say, ‘Is this next investment getting me closer to my goal or further away from my goal?’ That’s what a financial adviser does. They’re going to protect your wealth.”
An advice on building a financial team: Be discerning
No matter the number of members in a financial team, it is extremely vital that investors be discerning about the people they take on with them in the investment journey – their “A Team” – especially now that there are not yet any regulation in property advice.
While it’s considerably easier to look for agents, accountants, managers and advisers online, Phil and Rich advise investors to take the time to meet the people they are looking to hire.
Phil said: “The Property Investment Professionals of Australia have been working hard [with the government for] quite some time to try to get some regulation around this but as it sits right now, there’s no real regulation around people providing advice around property. So it’s a bit of a murky world, property investment advice ... Google ‘property spruikers’ and you’ll see some alarming stories over the years of people just getting taken for a ride. Well-dressed blokes in suits who talk really well, you know, selling a dream about property investment and fleecing people. So you need to be exceptionally careful about who you take advice from in property and you need to understand why people are providing you that advice. If you’re paying a fee for that advice, that’s typically a good thing. So that person is operating on your behalf.”
One of the things an investor must really consider is the fee – from the total amount to the source of the payment.
Rich explained: “Choose an adviser that’s fee for service, not taking a percentage of your overall wealth or trying to put you into a managed fund and take a cut of that just because they’re going to place you into that investment and they’re going to get a big kickback.”
The safest and most reliable choice are licenced professionals and experts who have been in a property investment journey themselves and have found success.
“You’ve got to get someone who’s, firstly, licenced in the state where you’re buying. They should be a member of PIPA and also a member of REBAA, the Real Estate Buyer’s Agent Association. Both of those groups have a very strict code of ethics, and you know you want to work with an adviser that’s got your best interests at heart and not getting secret kickbacks along the way,” Rich concluded.
Tune in to The Smart Property Investment Show’s Q&A session for more information on tax time, as well as other wealth creation efforts.