With an increasing number of financial advisory groups offering some form of property advice either through in-house specialists or through a referral agreement, property advisers are confident that the trend will continue – although greater regulation in the sector is both likely and necessary.
Dixon Advisory offers both financial advice and specialised property advice, and managing director Alan Dixon (pictured) said it was disturbing how little attention was given to the property market at the time of the Financial Services Reform Act 2001.
Because both planning and property advice involve large transactions that can have a significant effect on clients’ lives, they should have similar licensing requirements, Dixon said.
The relative strength and safety of the property market over a long period may be a reason people haven’t realised the market should be more tightly regulated, he said.
But it’s difficult for the Australian Securities and Investments Commission (ASIC) to make sure financial firms give clients all the information they need without making client documents more complicated than they already are, Dixon added.
Ironstone Group’s property advice arm Capital 360 provides specialised property advice to clients from various planning groups on a referral basis. Ironstone Group chief executive Sean Preece said there would be more scrutiny around property information that is provided in the marketplace – something that he said was necessary.
“[Businesses such as Capital 360] will be included within the overall regime of ASIC because it is an investment class, and we welcome that,” he said.
Preece also said clients needed to look at the motives of people who were providing advice on property. Real estate agents represent the seller – but someone in the market needs to represent the buyer.
Financial advisers will continue to have clients who have a need or a desire to build wealth by investing in property, but the industry doesn’t provide an easy mechanism for an adviser to gain support in terms of research or buyer’s agency services on behalf of their clients, Preece said.
Dixon said that many clients expect a financial advice provider to have some expertise on residential property the way they would on Australian equities.
While on balance it’s much easier to become a real estate agent than to become a financial planner, many clients like it if their planner has also done the work to get the real estate agent’s licensing skill, he said.
As a financial planner who can give holistic advice, failing to give advice about people’s property decisions would be crazy, he said.
Most larger advice groups do not have a specialised property advice service. This includes HLB Mann Judd, whose head of wealth management at HLB Mann Judd Sydney, Michael Hutton, said clients usually had an idea where they wanted to buy already.
His firm is happy for them to speak to local agents, and clients are happy for that to be a separate transaction, he said.
“I’ve been aware of some firms getting into that space and becoming specialists, but to me that would just be a value-add – I don’t think it’s a core requirement of a financial advice firm,” Hutton said.
