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Many people turn to financial planners or advisors when they're trying to secure their financial future - but these professionals may not be able to help you with property research and selection.
Blogger: Andrew Crossley, Australian Property Advisory Group
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 and property sourcing.
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 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.
People do need advice
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.
A true property advisor conforms to the following
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
• 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.)
All of this acquired knowledge culminates in an individual who has the adequate education to allow the professional indemnity insurance provider to then provide them with cover. The fact that a person is eligible for professional indemnity insurance sets them apart from everyone else. Those in the industry who are not eligible to receive property indemnity insurance should not, and must not, provide property advice.
The above is an extract from Andrew Crossley's new book Property Investing Made Simple. Stay tuned for part 2 of this series on property advice.