Now that the get rich quick property seminar gurus are sinking into the quicksand, and residential property prices have started heading south, the average punter must be feeling rather fearful. For many years now, these hard working Australians have been scared out of their wits by the incessant bleating of political and economic analysts in relation to life after retirement. These analysts have taken delight in informing the average man or woman in the street that they will not be able to afford to live much beyond retirement age due to their insufficient savings.
Some of the concerns are quite reasonable. At a time when the first wave of baby boomers is getting close to retirement age, there is legitimate concern about how their retirement is going to be funded. The thing is, I am not convinced that scaring people into believing they will never be able to afford to retire is the answer.
Another more sinister source of commentary is from the superannuation industry which constantly releases self serving data on the need for compulsory superannuation to be much higher than it is. You’ve heard the one about lies, damn lies and statistics. Think of all the extra management fees the superannuation funds could generate if the Superannuation Guarantee Levy was 15% of an employees gross annual salary. Of course, if a certain superannuation fund is larger, then the senior executives will ‘justify’ an appropriate remuneration won’t they!
In the face of underperforming superannuation funds, people are naturally attracted to schemes that promise the world. It’s the fear and greed factor, and that’s why I like property trusts. Thankfully, the property trust world is largely immune to unachievable promises these days due to the strong regulatory environment in which it operates. Property trusts, whether listed or unlisted, have demonstrated strong total returns over the past 50 years. They are less volatile than shares and often have the highest level of relative return to their volatility when compared to most other asset classes. Property trusts come with substantial taxation benefits and are an effective hedge against inflation. But the best attribute of all is that property trusts do not claim to make you a millionaire (what is a million dollars these days anyway!) in 6 months, but are quite likely to be still working for you even after you’re not.
Remember the old saying: If it seems too good to be true, it probably is. And also remember that the first question you should ask any promoter of a financial product is “can I please see a copy of your AFS Licence?”
Anton Lawrence is a Director of Managed Investment Assessments.*
