@ tech/a:
Look, I'd be the first one to admit that many financial planners are no more than product sellers. The big banks and the likes of AMP/AXA view their "wealth management" sections as "distribution channels" - they even refer to them as such.
You just need to go to an employment site like Seek to see that just about any bank ad will stress that to get the job, you must have "proven selling skills".
The fund managers make a lot more money out of managing your funds, than they would out of just taking a percentage of the financial planner's fee revenues in order to provide the compliance and other services that an Australian Financial Services Licensee is obliged to provide to its authorised representatives.
When you then look at the overall investment & taxation and other required technical knowledge that these planners exhibit, it tends to be woeful.
At the same time, however, top quality advisers do exist, and over the last few years in particular, they have been growing in numbers. They will typically work for boutique practices that in many cases have their own AFSL licence, so as to eliminate the product-related conflict of interest. They will work on a fee for service basis and will charge for advice, with product selection being only the last step of a comprehensive plan. In some cases, these guys will act solely as overall strategists and will pass the actual portfolio design to other specialists, who do nothing but that and hold the appropriate qualifications.
I think it is unrealistic to look back now and say "they should have known back in 1997 that it was a good time to buy property". The truth is that nobody could have known, just like nobody could really know that prices would grow still much further, considering there were all the indications around in 2004 that the property bubble would burst there and then. Just do a Google search for "Australian property bubble" to see what I mean.
Financial advisers are in fact not allowed to give direct property advice. If you come to me and ask "I'm looking at such and such a property - does it look like a good deal?" - then I can run the fundamental figures and say yes or no. I can also say that in the context of your overall portfolio, buying an investment property could be an appropriate strategy.
But I can't say "you should go and buy such and such a house over at Sheridan Street, because it's a bargain". That's not allowed under the general provisions of the AFSL licence.
On the other side of things, the vast majority of Australians will go and look at buying an investment property as their very first major investment. That is not a good idea in most cases, regardless of the overall appearance of the market. The minimum cost of such an investment means by definition that the person concerned will have a very large loan liability, concentrated into an illiquid, inflexible asset with very high entry and exit costs. It will also mean his/her investments will all be concentrated in the proverbial "one basket". Furthermore, they tend to lack the experience which comes over years of investing, so often get sucked in by smooth-talking salesmen into buying what turns out to be by far not the best option.
So in such cases, there is no way I'd say "yes, go and do it" - regardless of the broader property market outlook. I'd be much more likely to say "look, why don't you invest in a selection of listed property trusts - these will give you the exposure to a similar sector, and yet will be liquid, flexible, offer very low entry and exit costs and you can size your position to allow you to diversify elsewhere; say into some top blue chips, to get the benefit of franking as well."
Top financial advisers do not pretend to be the pickers of the next best investment sector. They are also reluctant to trade clients' portfolios too much; the costs of that tend to be high, it simply is not what is expected from us and in the context of running a practice, it generally cannot be done anyway.
In any case, you can often save clients a lot more through a strategic restructuring of their affairs than by trying to find the best investments and manage them overly actively. To give you an example, a couple I have been working with recently can expect tax savings alone in the vicinity of $350,000 over the next 10 years or thereabouts - purely through taking advantage of the relevant legislative rules and arranging their affairs accordingly. There is no product sale involved and they are happy to pay $10K/annum to have this strategy managed.
The risk of under-delivering is then also a lot lower than with chasing high returns; we are simply taking advantage of existing tax rules. If those change, we will change our strategy accordingly. We will not have to worry about a high performing investment suddenly doing a Centro/ABS/AFG/MFS on the background of greatly positive analysts' recommendations, coupled with a market downturn.
This is where good advisers add value, without having to be overly active portfolio managers and without pretending to know whether buying a property today will see you double your investment over the next 5 years.
Good advisers will, however, not hesitate to tell their clients that on any fundamental measure you care to use, residential property is now grossly overvalued, that many Australians are overloaded with debt and that if the economy slows down sufficiently - which is likely considering the developing situation in USA/Europe, we will have a substantial problem on our hands. This is just employing some common sense and being prudent.
It doesn't mean I'd be telling everyone to go 100% cash though. It also doesn't mean that I will say to a long term investor "get out of CBA; it's dropped by 25% from its peak and the chart is quite bearish at the moment".
Alas, sometimes it does mean that you will have the CNP/AFG and so on in some of your clients' portfolios. Nobody is infallible and if the track record has been top-notch, the fundamentals look good and you get consistent commentary from the analyst "gurus" that getting into AFG at $6 is a bargain, then you are likely to crash and burn very quickly from time to time. This is why you do not allocate 100% of your money into any one asset; property inclusive.
Am I certain I am right? -- Of course not. Nobody can be. But that's the best I can do and I don't pretend to be able to do better. There is only one Warren Buffett and even he does not give tax and superannuation advice!
Cheers,
Tom R.