The recently concluded first hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry uncovered what most property investors have long suspected.
Many investors have harboured suspicions that there is a product pushing sales culture within the financial planning industry which encourages some to act in their own, rather than their clients’ best interests, so it has come as no surprise to hear these fears confirmed at the Royal Commission’s recent hearings.
Many financial planners, it seems, do not recommend property investment when providing supposedly independent and unbiased advice regarding investment choices to their clients. The Royal Commission has revealed that it’s not that property doesn’t generate both cash flow and capital growth, but rather that financial planners can often profit from the sale of certain in-house financial packages to their clients by receiving financial rebates, commissions, kickbacks or finders’ fees which they don’t receive from providing property investment advice.
This encourages some to recommend certain financial products and investment packages even though they provide less than optimum results for their clients when compared to independent property investment choices, because such advice does not offer advisors the returns offered to them by other financial products.
We can only hope that the Royal Commission’s recommendations will result in changes that ensure investors are given unbiased advice which is in their best interests.
John Lindeman is widely respected as one of Australia's leading property market analysts, authors and commentators.
Visit Lindeman Reports for more information.
He has well over fifteen years’ experience researching the nature and dynamics of the housing market at major data analysts.
John’s monthly column on housing market research featured in Australian Property Investor Magazine for over five years. He is a regular contributor to Your Investment Property Magazine and other property investment publications and e-newsletters such as Kevin Turners Real Estate Talk, Michael Yardney’s Property Update and Alan Kohler’s Eureka Report.
John also authored the landmark books for property investors, Mastering the Australian Housing Market, and Unlocking the Property Market, both published by Wileys.
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.