To recommend or not to recommend property? That is the question dividing opinions in the financial planning industry.
Whether it is because of a lack of commissions, the risk of legal action or a lack of knowledge about the property market, many advisers steer altogether clear of recommending property investments.
In particular, many will only provide advice for investing in financial products regulated by the Australian Securities and Investments Commission to ensure they are covered if anything goes wrong with the investment.
While there is an argument for taking this approach, it does not have the client’s best interests in mind because property is an essential component of any diversified investment portfolio.
Property investments not only provide tax benefits and a passive income, they can also be leveraged to a much higher degree than shares due to the safety lenders see with property.
Most people are able to invest in property using the equity that has built up in the family home. After a few years, the growth in the investment property can be used to fund a second investment, so it is possible to collect a portfolio of properties without the client ever having to use any of their own cash.
To not recommend property means clients miss out on a proven investment product, but it is little wonder advisers are cautious when lawsuits about property advice have been made against advisers in the past.
How to get to be the go-to
This issue could be resolved altogether, however, if property were regulated and in turn offered advisers the same degree of protection as if they were to recommend managed funds, for example.
For clients to get the best possible property advice, it needs to be a regulated product and advisers should also be able to receive a commission or charge for the advice. 
And, given the buyers advocacy industry is still in its infancy in Australia and many investors are not comfortable paying for this service, the financial planning industry has an opportunity to be the go-to industry for property advice.
A good adviser knows everything about a client’s financial world, which means they are in the best position to make recommendations based on the client’s overall goals and wealth accumulation strategy.
Over the past 120 years, property has proven to deliver substantial positive growth across long-term investments of 20 or so years. With such a strong track record, the financial planning industry owes it to Australian consumers to consider property as a key part of the investment mix.
There is constant debate about the performance of shares versus property. But the truth is they both have their cheer squads and nobody knows which will perform better going forward, so an optimal portfolio should have both.
It is for this very reason that property should be a regulated product so advisers can confidently recommend property as part of any diversified and strategic financial plan.
Michael Pesochinsky is co-founder and CEO of Melbourne-based financial advisory, property and investment firm, Full Circle Financial Group.
With 86% of Australians preferring property as an asset class to equities and an understanding starting to filter through in the mainstream financial media to the public that as Australians we can control and have active participation with superannuation through an SMSF and further that the benefits of the power of leveraged investment properties long seen outside of super and can now be harnessed inside of super…. leading to Australians demanding that their financial advisor use strategic advice and well rounded asset allocation be able to allow them to work with normal discretionary choice and cherry pick direct property – it will soon be a brave new world where the vested interests of both dealer groups and real estate spruikers will be bipased by a new class of advisor who understands how to use direct property and leverage to their clients overall advanatage be it a core or sattelite strategy.