The recent banking royal commission has highlighted some shocking examples of investors being misled. With all this uncertainty around whom to trust, here are a few places where you can find your advice.
Banks, mortgage brokers and financial planners have been under review and they’re the ones that generations have trusted for decades to put them on the right path. So, where should you be going in the future for your advice?
There’re many different sources of adviser, from the one-man band to the blue-chip multinational. No matter who you deal with, one of the most important things to consider is: What results have they got personally? If they can’t do it for themselves, what are the chances that they can do it for you?
If you’ve got a goal of retiring early or taking every morning off, and they’re working 60-80 hours a week, are they someone you should be following?
One of the main advantages of using the bank that you’ve been with forever is that they’ve already got your personal information and so it’s an easier process than going to someone new.
Also, if you’re in premium or private banking, you can often have a one-stop shop with a small team consisting of a lender, a financial planner and an insurance specialist.
However, that shouldn’t mean you get lazy and just accept what they say. They can only sell the products they have, and there might be a much better deal around the corner.
Bank advisers often have more of an employee and job-for-life mentality and so can be less entrepreneurial compared to independent advisers.
Mortgage brokers have a much greater chance of giving you a better deal, as they often represent 30 to 40 lenders and can take you to the one that best fits your circumstances.
Loyalty is worth nothing these days, so even if you’ve been with your bank for 30 years or decide to go there direct, a new lender will almost always offer you something better.
Brokers are more likely to have many other clients that are multiple property owners and will often pass on plenty of knowledge and advice to the less experienced.
Planners often get a bad rap around property investors and this is because, traditionally, they never made any money by suggesting you buy property and would prefer you to invest in managed funds or other products where they would get a hefty commission.
Times are changing though, and a number of planners are trying to bridge that gap in the market. Legislation is also changing to ensure that planners charge a fee for service and then are completely indifferent over property versus shares from their personal income perspective.
However, those that really need the independent advice rarely want to pay for it and opt for free, biased advice instead, and they’re often the ones that end up in trouble.
Accountants have always been the trusted adviser as they’ve always been paid a fee per hour and didn’t have anything else to sell. That is changing though, and some are getting involved in planning and broking, with some getting into the grey area of recommending developer stock.
Accountants can be super conservative and so they’re not always the best at leading clients and being entrepreneurial. They should know the numbers inside out though, and they can be a great sounding block before proceeding with any plan.
Buyer’s agents are getting more commonplace these days, and many time-poor home buyers and investors are seeing the value in “paying $1 to make $2”.
If you’re not paying your buyer’s agents a fee, chances are they’re not actually working for you and are selling potentially overpriced and unwanted developer stock, similar to some financial planners giving free financial plans.
If someone is going to be helping you pick a $500,000 to $1 million property that you might be holding for 30 to 40 years, you need to make sure they know what they’re talking about and it will actually grow in value.
Ask them how much property they hold, how long have they held it for and how much capital growth they’ve experienced. If they’ve got the results, they shouldn’t be shy in coming forward.
Australians are renowned for chatting property over the BBQ with their mates and they probably spend more time listening to this advice than anything else.
Friends, family and colleagues are more likely to be independent and to have your back, but is it really the best advice you can get? Everyone is a property expert (in their own mind), and the louder they talk, the more they believe it’s true. Again, see what results they’ve got. Are they living the life or are they tied to the 9-to-5 for 40 to 50 years?
Someone that earns $50,000 will probably need a different adviser to someone that earns $500,000, and their budget for paying for advice will be different, too. So, it’s best to start at a basic level and then upgrade your advisers as you outgrow their advice and contacts.
They say that the cheapest advice is often the most expensive in the long run, as either you’ve been ripped off for fees somewhere else or you’ve got into an investment that stagnates in value rather than rises.
Try and get the best advice you can afford. And if it all sounds too good to be true, it often is.