How can a financial advisor add value in this investor community?

Question

Greetings BP community! I have been a long time fan of the podcasts and investing in SFH for about 4 years. My wife and I just moved into a duplex in east Denver and we are going the house hacking route. Thank you BP for the inspiration!

I recently started a new career as a Financial Advisor after spending 5 years in the oil & gas industry. I'm partnering with a 39 year veteran to teach me the ropes, but I wanted to enroll your help to see how I could combine my passions for real estate and for helping clients make well-informed financial decisions.

How can I carve out a niche by truly helping real estate investors achieve financial freedom and help them attain their goals? What ways could somebody like myself add value to what y'all are trying to accomplish?

Thanks in advance for your advice and insights.

Travis Sperr · Answer

Account Closed Welcome to BP - this is a fantastic question and great that you have the interest in actually asking it. It has been my experience that most of the planners I have met don't like real estate investing for 2 reasons - they don't understand it and more importantly don't get a commission. I have never heard of a financial planner suggesting that someone liquidate a portion of their portfolio to purchase a cash flowing asset that may offer tax benefits. The other side of that could be that if you did suggest, is the client ready and able to become a landlord. Keeping in mind that everyone has very different experiences, circumstances and needs from a planner I am guessing the vary.

Best of luck to you as your grow your business!

Chris Lopez · Answer

Account Closed

First, I agree with the above posts.

I have a love / hate relationship with the financial planning industry. I graduated college with a financial planning degree and all the CFP requirements. However, I didn't pursue it out of college, mainly because I got bit by the entrepreneurial bug and had a couple of businesses going.

Last year when I was looking for a new business, I spent a few months looking back into becoming a financial planner.  I didn't pursue it because:

1) Compliance was a pain in the ass and limited what you could do.

2) I don't like the traditional models of planners - you're either a salesperson making a commission or you're charging fees for AUM. I have yet to find any data that either method returns a better ROI then simply putting your money into a low cost S&P 500 index fund.

When my basic investment advice is "don't be an idiot with your money (i.e. spend less then you make) and don't buy anything but term life insurance and index funds" - there isn't a whole lot money to be made using the traditional models. I couldn't make the numbers work (for my return) on charging hourly or doing a monthly or quarterly retainer.

My plan was to skip getting any professional designations (to avoid compliance fees, paperwork, and limitations) and put my focus on online marketing to drive business for clients (a lot can be done over the phone), affiliate commissions for recommending services (recommending SoFi for student loan refinancing), and referral fees.

I agree with you on incorporating real estate into your mix. Consider how you could leverage the internet to drive business and revenue. Not sure of the rules, but could you get your RE license to receive referral fees from brokers?

I have a notebook full of notes and ideas. If you want to discuss, please reach out to me. I plan on doing something in the personal finance space, but it'll be more of a hobby (one that makes money) and that feeds into my real estate business.

Paul Allen · Answer

You aren't talking to planners. You're talking to salesmen. (And I think you know this!)

It's natural to be confused. You need zero credentials to call yourself a "Financial Planner", so salesmen frequently market themselves as planners. It gives us real financial planners a bad name.

Good luck @Nic Breen!

Bill S. · Answer

Account Closed said. My "financial planner" flat out admitted he didn't understand real estate and he manages millions for people. I have another financial planner wanting to lend money to my real estate deals me but the "company" he is with won't let him do side deals because "it could get them in trouble if something goes wrong."

Brian G. · Answer

Account Closed - Hey, Nic! Just wanted to reach out because I'm actually on a pretty similar track to you. I am just starting out with clients after starting my own RIA and would love to hear how you're starting out. I work in a totally different industry to keep a roof over my head (that I'm happy with, but it's flexible enough to allow for side hustles), so I'm still learning the more day to day operations stuff since I never worked in advising before.

But, I have a background in and love real estate, too, and also enjoy financial advising, so I figured I would try to utilize those skills.

Anyway, I'd certainly love to pick your brain, if you'd be up for it. Good luck in your endeavor, either way!

Account Closed · Answer

Thank you for all the great insights and well wishes so far! It sounds like if I can create an expertise around how real estate compliments an investment portfolio (tax benefits, diversification, etc.) I can help add value to my clients. It may be a good niche based on your feedback that financial planners don't typically understand it or spend time in this space.

Paul Allen · Answer

@Shawn M Hannan I think I more closely fit the description of a financial planner who is not afraid of real estate. Or maybe, 'who views real estate as an asset class that can and should be worked into a financial plan'.

In other words, I am not a real estate expert. My value to a REI would be in developing the rest of the financial plan.

Shawn M Hannan · Answer

This thread "resonates" with me, in that I would really like to find a financial planner with significant expertise in the realm of real estate, but haven't known where to look.  Then it occurred to me (duh!) that BP is certainly a good place to start!  @Paul Allen, I gather you fit the description?  Is this the right forum to seek an advisor, or is there a better way to "shop" for an advisor on BP?

Thanks!

Mike Dymski · Answer

Be an independent advisor who also raises capital for real estate deal sponsors.  You would need to be independent because brokerage houses won't allow you to put client money into real estate.  And, for real estate, there is compensation for raising capital for deal sponsors (i.e. equity in the general partnership).  Full service money manager.

How can a financial advisor add value in this investor community?

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