Do financial advisors just not get RI?

[Kevin McGuire]

Hi BP community,

It’s taken awhile to get my financial planner to understand what I’m doing with Real Estate Investing. I interviewed a new one from a well regarded independent boutique firm and again he didn’t quite get it. I don’t need them to help me run the RI business but I do need them to factor it in properly to my overall financial picture and retirement planning.

For my first advisor, he only looked at the value of the equity, I got him to think of it as asset, liability, income and costs. Moving to Quickbooks Online and producing a balance sheet and P&L helped a lot, it then looks like any other business.

My new guy looked at the cash flow as not contributing to retirement income until the mortgages are paid off (my net with mortgages is trivial). But then I explain that I can cash out refinance, take equity out, and not pay income tax. Boom. They don’t know how to model that. Or, sell property to clear off the other mortgages.

I also had to explain to each the whole purpose of doing this: income generation without drawing down the capital producing the income.

I think the basic problem is that financial advisors are trained to think of stocks, bonds, etc. Maybe I need to talk about RI in those terms: property = stock, cap rate = yield, mortgage = margin loan.

I think another problem is the guardrails in place, certainly in the case of the first advisor, on what the firm allows them to advise on.

What are folks’ experience here in working with financial planners? Is this just typical? How can I help them to help me?

[Account Closed]

Originally posted by @Kevin McGuire:

Hi BP community,

It’s taken awhile to get my financial planner to understand what I’m doing with Real Estate Investing. I interviewed a new one from a well regarded independent boutique firm and again he didn’t quite get it. I don’t need them to help me run the RI business but I do need them to factor it in properly to my overall financial picture and retirement planning.

For my first advisor, he only looked at the value of the equity, I got him to think of it as asset, liability, income and costs. Moving to Quickbooks Online and producing a balance sheet and P&L helped a lot, it then looks like any other business.

My new guy looked at the cash flow as not contributing to retirement income until the mortgages are paid off (my net with mortgages is trivial). But then I explain that I can cash out refinance, take equity out, and not pay income tax. Boom. They don’t know how to model that. Or, sell property to clear off the other mortgages.

I also had to explain to each the whole purpose of doing this: income generation without drawing down the capital producing the income.

I think the basic problem is that financial advisors are trained to think of stocks, bonds, etc. Maybe I need to talk about RI in those terms: property = stock, cap rate = yield, mortgage = margin loan.

I think another problem is the guardrails in place, certainly in the case of the first advisor, on what the firm allows them to advise on.

What are folks’ experience here in working with financial planners? Is this just typical? How can I help them to help me?

 They aren't trained on real estate investing because they can't make a commission. There is no point, in their eyes, in directing you to products they can't make money on.