High-profile firm Dixon Advisory has begun recommending geared residential property investments for its self-managed super fund (SMSF) clients.
Dixon Advisory managing director Alan Dixon told Money Management the combination of new borrowing rules for SMSFs and the reduction in the concessional contribution caps had created the right environment for a substantial increase in residential property ownership in SMSFs, with negatively geared property offering tax benefits once the domain of salary sacrifice strategies.
Dixon said while the take up of property gearing in super had been modest following the introduction of the rules in 2007, he believed there was “a real chance that we’ll ultimately end up with an SMSF sector with as much of 20 per cent of its assets [in property]”.
Dixon’s SMSF clients currently have a residential property weighting of 6 per cent, but Dixon expected “a consistent climb over the next few years given the experience people have had with other asset classes”.
Dixon Advisory now has a team of nine, led by Chris Duffield, working in its recently established property division.
The group is offering services ranging from conveyancing, loan structuring and SMSF administration through to recommending residential properties to prospective buyers, with that service currently restricted to the Sydney market. The group is charging 3 per cent commission on the value of the property for full service advice.
Dixon has an alliance with The Rock Building Society, and takes product margins on loans offered to clients, but will also structure loans for clients who wish to remain with their existing provider.
The group has a similar model in place for its equities advice — charging fee-for-service but also generating revenue from the ownership and management of a number of listed investment companies it recommends to clients. Dixon described the potential conflict of interest present as similar to those faced by institutionally aligned advisers who recommended in-house products. He said around one-sixth of Dixon’s clients were currently invested in in-house products.
On the topic of a potential residential housing bubble, Dixon said there was “no point pretending it’s not a significant risk”. Dixon said the group’s house view was that Melbourne property “is already overpriced”, while Sydney, particularly the inner suburbs, remained at “about fair value”.
“But we’re certainly not telling any of our clients it’s cheap and you’ve got to jump in.”
Residential property advice is not the traditional domain of financial planners. Dixon said those that do dabble in that area tended to recommend off the plan apartments that offer commissions of between 5 and 8 per cent.
