Why not talk to more financial advisors about real estate


    Why not talk to more financial advisors about real estate

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    Viking capitalIt is common knowledge that real estate investments are one of the most effective ways to build wealth tax efficiently. According to industry experts, a large proportion of the wealthiest people in the United States made their fortunes primarily through real estate.

    However, have you ever noticed that most financial advisors don’t really talk about real estate investing? And if so, demote it to the small part of your portfolio that is reserved for “alternative”, riskier investments.

    I know that there are many people who choose to manage their finances on their own, but I also know that many others like to have someone to guide them with expert advice. So they seek the help of a financial advisor.

    As a real estate investor, choosing the right financial advisor who understands you can take some time. If you manage to find someone who understands your financial strategy, including your plans to invest in real estate, it can be a significant benefit to you.

    So if real estate is a great way to gain financial freedom and your financial advisors are qualified to help you create a solid financial plan for growing your wealth, why aren’t more of them recommending real estate investments to their clients?

    Well here are some reasons why …

    1) Lack of knowledge

    Real estate investing is typically not taught in business or finance curricula.

    When financial planners work to get their CFP or RIA designations, they don’t get much on real estate investments other than investing in REITs. It mainly focuses on wealth creation through a combination of products such as mutual funds, bonds, and insurance.

    As a result, most financial advisors are generally unprepared to speak to their clients about real estate investments. Unless they are investors themselves, knowledge of the wide variety of ways to generate returns on real estate, including cash flow, leverage, and tax breaks, seems pretty limited.

    Your understanding of the stock market is likely to be deeper and broader.

    Unless a financial advisor proactively educates himself on the subject, the chances of getting that person to advise you on real estate matters are incredibly slim. It is not a profession or profession judgment, it is simply a matter of education and training.

    According to Ravi Davis, a financial advisor and founder of Hippocratic advisers, “There are only a handful [financial] Experts with a direct real estate background who invest beyond REITs and their main residences.

    Also, very few talk about real estate investing in a substantive way that covers investments such as direct property or private placements. And when they do, their understanding is usually limited to REITs as diversifiers to a broader equity and bond portfolio. “

    2) Incentive and remuneration

    Viking capitalFinancial advisors are typically remunerated in two ways.

    1. Selling Products – Traditionally, financial advisors can be compensated on a commission basis and are authorized to sell investment vehicles such as stocks, bonds, mutual funds, insurance products, etc.
    2. Assets Under Management – When your financial advisor invests your money in stocks and bonds, they’ll charge a percentage fee to manage your portfolio. Typically, their fees average around 1% of your portfolio value. And if your portfolio is in the high 6- or 7-digit range, that’s a substantial amount to earn annually.

    Outside of REITs, the purchase of your own rental properties or passive investing via syndications or funds are unfortunately excluded from these remuneration models.

    Everyone is motivated by incentives, be it obvious or unintentional. We are people and drives are our actions. This is a great thing first and foremost because it drives us to work hard, to expand, to try new things, and to be innovative too. It helped us get to where we are today.

    However, that incentive can also force us to choose what to focus on and what not.

    There is simply very little incentive for financial advisors to have their clients invest in real estate outside of REITs.

    3) Regulatory supervision

    Licensed financial advisors who sell and manage investment products must also adhere to strict regulations and compliance standards. These regulations are introduced to limit unethical practices in the investment industry. These standards also serve as guidelines for your advisor to recommend the products they sell to you.

    In addition, these regulations are usually applied to licensed products. Therefore, a licensed advisor providing advice on unlicensed products such as real estate can lead to regulatory issues.

    So just stay away from it.

    Final thoughts

    Viking capitalAccording to Robert Kiyosaki, author of Rich Dad Poor Dad, the key to winning real estate is moving your money to buy new assets and grow your portfolio.

    Ultimately, this is how you increase your wealth and create financial freedom – cash flow assets.

    It is unfortunate, however, that more financial professionals are no longer talking about it, or even discouraging knowledgeable doctors from devoting more of their portfolios to these occasions.

    Hippocratic’s Ravi Davis says, “When financial advisors are knowledgeable, they should talk more about real estate investing. Many clinicians are interested in real estate investments to some extent, and helping them understand the intricacies of various types of property and ownership, such as direct ownership, limited partnerships, and REITs, is an essential element in being able to add value to the doctor’s investment decisions.

    “Only REITs” or “I don’t know” essentially leaves a lot of financial leeway. “

    I think it is important to base your strategy on your own training and get the help of someone who can help you execute that strategy.

    In order to be able to advise you on this issue, it is crucial to find an advisor who understands the benefits of real estate investments. Take the time to get in touch with someone you can trust.

    If you can’t find someone who fits your vision, just educate yourself to manage your real estate projects yourself and let your financial advisor handle your more conventional investments.


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