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Advisors Should Not Let Their Investors Miss Out

Peter Benson, CEO of Credit Connect Capital Limited, says it is a long time since he has seen conditions so favorable for commercial lenders in over 20 years in the industry. He said, “the number of credit worthy borrowers prepared to provide first mortgage security over real property, importantly at low LVRs, is tremendous, and that puts investors who lend on commercial loans in the box seat – they have a lot of choice”

Transparency and choice are the keys for those who recognize the sense in participating. “Select Fund investors receive the details of an independent valuation as part of the Supplementary PDS that comes with each commercial loan, so they can make well informed decisions when they select investments – that’s ideal for pro-active wealth advisors and SMSF’s”, added Peter.

But as the RBA graph below shows, investors who could benefit most might be missing out because of their incorrect perceptions of risk and that’s where a sensible wealth advisor can help.

The RBA graph above shows how investors in the over 60s group have quite rightly become risk averse given the volatility of equity and bond markets in the last 7 years. Many have increased their direct investment in established property at a time when there’s an RBA & APRA have pushed to suppress property price growth rates. These investors are at risk of under-performance in their investment portfolio. Such investors need sensible wealth managers to help them diversify into commercial loans as a way to generate monthly income and avoid fluctuations (volatility) by using property as security, rather than as a direct investment.

Peter Benson believes the opportunity to get set is now and his sentiments were echoed by Christopher Kent, Assistant Governor (Economic) at the RBA, in a broad sense, when he pointed out how excessive fears of risk are likely to give way to fears of “lost opportunities……[1] Particularly since the economy appears to be rebalancing from mining led investment to broader economic investment – with construction investment making up an important part of the mix.[2]

[1] Christopher Kent, Assistant Governor (Economic),RBA, Address to the Bloomberg Economic Summit, “Non-mining Investment – Where to from here?” 16 September 2014. http://www.rba.gov.au/speeches/2014/sp-ag-160914.html

[2] Philip Lowe, Deputy Governo, RBA, Address to the Commonwealth Bank of Australia’s 7th Annual Australasian Fixed Income Conference, “Investing in a Low Interest Rate World”, 21 October 2014,  http://www.rba.gov.au/speeches/2014/sp-dg-211014.html

Disclaimer: This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and seek specialist advice from a qualified and licensed advisor.

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