The fragmented property investment model has the potential to allow financial planners to viably provide advice on direct residential property ownership and thus fill an expectation gap that currently exists in the market, a wealth specialist has said.
“Residential property has always been a financial planner’s Achilles’ heel. What I mean by that is it’s an asset class that we all own, it’s an asset class as financial advisers we all invest in, but we can’t actually give our clients any advice within this asset class,” Your Corner finance director Matthew Brown said at a recent investor seminar hosted by fragmented property investment service provider Bricklet.
Under the fragmented property investment structure, individuals, including SMSF trustees, can directly purchase and hold a stake in a residential property made available to them by an investment manager such as Bricklet.
“The way [the model enables us to provide advice about residential property] is by allowing us to look at the client’s goals and objectives and then building a diversified portfolio of those [fragments],” Brown said.
He pointed out the ability for a financial planner to give advice about direct property investments means clients will be more likely to make portfolio allocations to the asset class using the most suitable structure for them.
“Realistically when most people come to an accountant or financial adviser [about a direct real estate investment], they’ve already bought the property,” he noted.
“They’ve usually already bought it in their personal names, usually as tenants in common, and usually that’s not the best way to do it.
“So having access now to a product where you can sit down and talk about exactly owning [the properties], and how you should own them, and then the benefits long-term of owning [the assets is very good].”
The fragmented investment model also gives advisers the flexibility to recommend buying into the most suitable type of properties for clients as determined by their life-cycle situation, he said.
“If you have a younger client with a smaller amount of money, you’d be looking at more growth investments around property,” he said.
“If you’ve got an older client that has quite a significant amount of money in a self-managed super fund and really is not looking for growth but for inflation and some income, then you can build a yield-driven portfolio.
“Those are the things that excited me the most as a financial adviser, and also running an accountancy practice, for how it’s going to best impact our clients.”
