Right of entry

Financial planners gave mixed reactions to reports that a company related to real estate icon, Ray White, would be venturing into the financial planning space but is the issue any different to the entry of mortgage brokers? 

It is hardly surprising that the announcement that a company associated with the Ray White family intended venturing into the financial planning space caused something of a stir in the sector earlier this month. 

Real estate sales mixed with financial planning has always been a heady mix and it should be noted that some time after the initial reports, Ray White Real Estate sought to clarify that there would be no directional affiliation with the financial services venture, Wealth Market, which was described as a “half sibling” with only limited cross-ownership. 

Anyone who has been associated with the financial planning industry over the past 10 years will know the unease with which the involvement of mortgage broking firms was viewed. Little wonder, then, that the suggestion that real estate companies had entered the game served to light up Money Management’s comments section. 

However it is worth noting that while the entry of mortgage brokers into the financial planning realm may have caused some initial consternation, the reality in the shape of companies such as Yellow Brick Road has proved to be largely unremarkable. 

Indeed, it needs to be remembered that just as mortgage brokers sought to play in the financial planning space, financial planning providers such as Count Financial (now owned by the Commonwealth Bank) actually took up equity in mortgage broking firms. 

The move by mortgage brokers into the financial planning space was influenced, in part, by the tightening of the regulatory environment in which they operated to one much more closely resembling that of the financial planning arena. 

However while there was much speculation around the number of mortgage brokers who would upgrade their qualifications to become financial planners, firms such as Yellow Brick Road tended to recruit financial planners rather than seek to utilise the services of their brokers. 

All of which brings us to the reality that while Wealth Market may have filial links to a long-established real estate company, it will be anxious to ensure that those it employs will do nothing to undermine the status of its Australian Financial Services License. 

It must also be assumed that just as other financial planning dealer groups have recognised the relative merits and demerits of direct investment in residential real estate, so too will those planning groups related in some way to real estate firms. 

One of the spokesmen for the Wealth Market play, Sam White, earlier this month suggested that the venture would come to the financial planning market with fewer legacy issues than some of the longer-established players when it comes to trailing commissions and grandfathering and he is probably right. 

But White should probably also be conscious of the fact that his venture will be the subject of some intense scrutiny from an industry cynical about his company’s historical antecedents and looking for even the hint of residential real estate spruiking within its approved product list. 

Real estate sales and financial planning are two very different markets.