A review is an opportunity to assess whether or not a property investment strategy is meeting its aims over the medium and long term. They need to be carried out in addition to the 12 month review referred to earlier in this module. Reviews consider the extent to which the investor’s original goals are being achieved and whether the assumptions against which they were defined remain the same. Reviews also provide the opportunity to suggest changes to investment strategies.
Strategy reviews are an important part of any advice industry and while they have not always been carried out in the property investment sector, they are now becoming seen as an important way to offer a professional, on-going service that is valuable to clients. At the same time, reviews provide the opportunity for you to stay in touch with clients and be held to account for the recommendations they make. They also offer a forum to work with clients as their circumstances change and tailor their property investment strategies to stay in line with changes in their lives. Reviews are a way of maintaining contact and continuing to build a trusted relationship between you and your client. A range of circumstances might signal the need for a review and we discuss these in the following paragraphs.
It may be that a client is fairly new to their investment strategy and on a steep learning curve. Reviews enable clients to raise their concerns and have them dealt with. The circumstances of clients can and do change. Reviewing investment strategies and individual investment properties on a regular basis enables you to work with the client to ensure that the strategy is still appropriate.
Where a particular property is not performing as expected, you need to assess whether this is a short-term problem or one that is likely to continue. You need to discuss with your client whether it may be advisable to sell and purchase a different property.
Circumstances for all of us can change quickly or we can plan for the change. Retrenchment or another reason for loss of income might occur without us realising this will happen. Retirement can usually be planned for but in any event, a substantial change in the amount of income earned may render a property investment strategy no longer suitable.
It may be that a client is moving interstate and wants to retain only one or two properties in their current state so that they can invest in their new state. They may want to use the opportunity to diversify into other types of investments.
It is also possible that the client’s other investments are not performing as well as expected, while the property investment is performing well. The question here is whether the client should sell the other investments and put more funds into property or whether the balance and diversification are appropriate and in the long term will even out the return on investments. Where there is “non property” investment assets involved (shares, superannuation, interest bearing deposits, etc.), this is financial advice and must be handled by other professionals, unless you are properly accredited under FSR.
At each review, you need to consider whether or not the strategy is still appropriate for this particular client. It also makes sense that reviews should be scheduled in advance. Most financial and other advisors conduct annual reviews.