Why Combining Real Estate Expertise With Financial Planning Is A Winning Combination - Brent Gleeson

Although my articles usually focus on business leadership and entrepreneurship, my experience in corporate America prior to joining the Navy SEAL teams and the master’s degree following my service are all in real estate finance, investment and development. As an entrepreneur and business owner, I also find it prudent to also stay apprised of the best ways to make your money work for you.

It is human nature to want to be right, particularly when it is your job to be the expert. That is one reason why financial planners, individuals who have spent years studying and passing examinations to be allowed to consult people about their wealth, can be quick to minimize the role of real estate assets in a client’s portfolio.

The average CPA receives little to no advanced education about real estate, be that the market or how to manage real estate assets. Perhaps more importantly, such an advisor spends little to no time keeping up with the market or working in that space on a day-to-day basis. Real estate is not something that you can track casually; it is a fast-paced, highly nuanced industry.

 

That is why a new branch of financial planning called Integrated Asset Management (IAM) is gaining traction. The specialty of this sub sector is expertise across asset classes, to include real estate. But the way that is achieved is not by developing new advisors, it is by putting a variety of experts in the same office.

 

I recently sat down with Andrew Canter, CEO of Canter Companies and a leader in IAM. In our discussion he said, “No one is saying that financial advisors need to develop a whole new area of expertise; that’s just not realistic. But putting financial advisors and real estate experts under the same roof is, and that is starting to happen.”

 

At an IAM company, financial planners share an office with the other side of the business, which does real estate investing and development. The outcome is a proximity of experts who operate in two different industries that overlap at important junctures.

 

The need for a hybrid of expertise is growing. Real estate is an attractive investment right now, with interest rates still lingering near historic lows. In fact, some estimates say there are as many as 30 million Americans who have invested in both commercial and residential real estate. And the Bankrate Financial Security Index Survey released earlier this year suggested that 54 million Americans preferred to put money they would not need for the next ten years into a real estate investment over stocks or bonds.

 

That means that there is a substantial sector of the market that needs both a financial planner and a real estate consultant to help them manage their assets. Getting two different advisors to agree on how money should be appropriated, which risks to take, and how to achieve the same financial goal is unrealistic. And yet the nuances of managing real estate assets and traditional financial investments demands that anyone with such a diversified portfolio needs both kinds of advisors. At the same time as real estate is factoring into the lives of more and more Americans, fewer Americans know or understand what a financial advisor does. In a survey done this year by advisory firm McAdam, it was found that one in three Americans do not know what a financial advisors does, and that number increases to 46% among millennials. That could in part be because the financial services industry has not modernized itself to meet the needs and priorities of people in today’s economy.

 

That is, until now. IAM is following the tradition of many industries before it. Consider the movie rental industry. When it began, Blockbuster was king. So much so that one of my core functions as a financial analyst with Trammell Crow Company in, where I worked in 1999 after college prior to joining the Navy, was the analysis of new potential store locations. I remember distinctly because I misspelled their brand name on the cover of the very first proposal I built for them! Not one of my better moments.

 

But that business model was shaken up in 2002 when Red Box started distributing its DVD vending machines. That model was quickly replaced by Netflix’s DVD mailing business, which was actually able to pivot to today’s video streaming world quite successfully. Each step of the way, the market changed and an old model of business was phased out. Today, the market is arriving at a point where it demands more expertise of its financial advisors.

 

“This is a very real dilemma for people. I see it all the time,” says Canter. “Integrated Asset Management is a very simple idea: mingle real estate experts together with financial advisors in a mutually beneficial way.”

 

Whether IAM shakes up the entire financial services industry or just modernizes a piece of it, its emergence is an indicator of an industry in transition, which is good for all of us.

 

 

 

Brent Gleeson - Contributor
Leadership Strategy