The Successful Investor managing director Michael Sloan issued a statement yesterday saying clients aren’t getting the advice they need from professional advisers when discussing investment properties.
“Buying property inside your SMSF is clearly the flavour of the month, and the growth in this sector has been rapid. But it seems that many clients aren’t getting the advice they need in this area,” said Mr Sloan.
“A financial adviser has a lot to say when a client decides to purchase a particular parcel of shares for $400,000 in their super, but they are remarkably silent when the same amount is being spent on an investment property,” he added.
Mr Sloan explained most financial advisers and accountants “don’t know enough” about investing in property to assist their clients.
“They leave the entire decision to the client, and many clients are getting it wrong,” said Mr Sloan.
Analysis from the SMSF Professionals’ Association of Australia and Australian Tax Office has found investment in residential property rising 17.72 per cent to $20.5 billion in the 12 months to 31 March 2014.
SMSF and property are a great match as the future income is effectively indexed for inflation. The debt decreases in value over time and the value of the property increases all in line with inflation; capital growth is the icing on the cake.
If financial planners provide asset allocation for property in SMSF they also need to be able to provide appropriate risk mitigation for their clients approaching the property investment market. Business standards between property investment advisors, who put their advice in writing and have PI insurance, versus real estate agents who work for the vendor and can exaggerate claims to support a sale are huge.
Clients need to understand these differences and choose wisely. It can mean the difference between an above average performing property with good income and an over priced asset with out a resale market.