62% of Financial Advisors View Advising Clients on Investment Property as a Key Differentiator, Survey Finds

Yet despite client need, only 39% of advisors are actively advising on investment properties

AUSTIN, Texas--(BUSINESS WIRE)--New research completed by Wealth Management IQ in collaboration with Realized, a leading provider of Investment Property Wealth Management^®, finds that 62% of financial advisors surveyed see investment property wealth management as a key differentiator for their practice. Related, 58% of advisors currently advising clients on investment property said investment property has ‘definitely’ been a good investment for their clients over the last 10 years.

However, despite the differentiation benefits for advisors, the diversification benefits for clients, and the overall value add of real estate investment for retirement, the majority of financial advisors are not managing investment property wealth for their clients.

Advantage & Concerns

The advisors surveyed believe a variety of factors are either “critical” or “very important” factors when investing in commercial real estate, including portfolio diversification (66%), asset value growth (64%), and tax advantages (62%).

However, for advisors who are not currently advising clients on real estate, some of the top concerns include regulatory and compliance restrictions (41%), increased liability (38%), and a limited understanding of the real estate market (35%). Other key points of concern were a lack of processes or platforms to make investments (30%) or a lack of integrated tools to assist with the planning processes (27%).

David Wieland, CEO of Realized Holdings, said, “Advisors are in the business of managing risk for clients and their own practices. Historically, the real estate industry has been opaque and challenging to navigate, both from an administrative and risk assessment standpoint. In addition, most advisors can benefit from assisting their clients in generating consistent tax alpha on direct investment properties. The Realized Technology platform offers unique partnership opportunities for forward-thinking advisors. Specifically, the option to bring new assets under management by managing risk, maximizing tax benefits, and simultaneously moving your clients toward their retirement goals.”

A Growing Opportunity

37% of the surveyed advisors have 25-plus years of experience as financial services professionals, predominantly serving the Baby Boomer generation (42%). These experienced financial services professionals are working with client populations in the midst of retirement, where diversification, stability of income, and diversified, tax-efficient portfolios are of particular importance. On average, respondents reported that 18% of their client base currently holds investment properties.

Wieland commented, “Investment properties remain one of the most significant but least understood vehicles for wealth building across generations. Baby boomers have about $6.4 trillion of equity in investment properties-- about 10.5% of their net worth. Advisors are increasingly seeing the need to include real estate knowledge to provide holistic, comprehensive support for their clients. While there’s an immediate need to serve retirees, the opportunity for building bridges with the next generations (and potential future customers) cannot be overlooked. The nature of investment property wealth makes it sticky and strengthens that long-term advisor-client relationship across generations.”

Despite the demand from clients, only four in ten respondents (39%) are actively advising clients on real estate, leaving about 60% of advisors not tapping a significant mode of diversification and wealth building for clients. As a result, advisors who offer real estate investment support as part of their service offerings gain new opportunities to grow their practice with existing and new clients.

Other notable findings from the survey include:

• The primary reason surveyed advisors make real estate recommendations as part of client financial plans is to diversify their clients’ investment portfolios (68%). That is followed closely by providing a source of current income (63%). Trailing, at 36%, is adding an asset to fund future liabilities, including retirement income.
• The average portfolio of investment property wealth is $750K, or about 12% of a client’s portfolio. This survey finding is consistent with Realized research suggesting Baby Boomers have approximately 10.5% of their net worth in investment properties.

Methodology

To find out about advisors’ attitudes toward investment properties and their experience with the asset class, Wealth Management IQ, in cooperation with Realized, recently fielded a comprehensive survey of advisors. Beginning August 20, 2023, WealthManagement.com emailed invitations to participate in an online survey to active users. WealthManagement.com received 535 qualified responses by September 5, 2023. The full results of the survey will be shared during a live webinar on Thursday, October 26.

About Realized

Through Realized Financial, Inc. (“Realized”), Realized provides investment property wealth solutions to individuals and families that own legacy real estate investments and other appreciated financial and capital assets. Investors use the Realized platform to tax-efficiently transfer wealth from legacy properties into passive portfolios providing regular income during retirement. To learn more, visit www.realized1031.com.

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Securities are offered through Realized Financial, Inc. (“Realized”) a wholly owned subsidiary of Realized Holdings, Inc. Member FINRA and SIPC.