As a real estate investor, choosing a financial planner can be a daunting task. More often than not, you’ll be met with confused, deer-in-headlights stares if you try to bring up your real estate investments in a meeting with a financial advisor.
The problem with consulting a financial planner about your real estate investment plans is that most of them don’t know anything about real estate. It’s kind of like asking a dentist to perform brain surgery. The fact that dentists and surgeons are both medical professionals doesn’t mean they have the same knowledge or skills.
If you can find a financial planner who actually gets what you’re trying to do with your real estate strategy, they can be a substantial advantage to you. However, you’re better off managing your real estate investments yourself than relying on a run-of-the-mill financial advisor.
Why Most Financial Planners Don’t Get It
My experience with financial planners is that the vast majority avoid real estate investments. At first, you might find this confusing, since you know real estate can be a fantastic investment. But if you dig a little deeper into the world of financial planning, it will start to make perfect sense.
There are two notable reasons that advisors tend to discourage real estate investments:
Compensation models (they don’t get paid for your real estate investments)
Lack of knowledge (they don’t know diddly about real estate)
Let’s talk about how each of these factors contributes to your standard financial planner’s allergy to real estate.
Unfortunately, a substantial majority of financial planners are just repackaged stockbrokers or salesmen in disguise—same job descriptions, different titles.
Most financial planners are paid in one of two ways:
Earning commissions from the sale of certain financial products, such as mutual funds.
Receiving a percentage of the total market value of the investments they manage. This is called the Assets Under Management (AUM) model.
In other words, they don’t make money when you invest in real estate; they only make money when you invest in the securities they try to sell you. Are you starting to see why so many financial planners dislike real estate?
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