Property Reporter

THE new Financial Advisory and Intermediary Services (FAIS) Act, and the trend towards fees rather than commissions for financial advisers could be good for the listed property unit trust sector, says Association of Property Unit Trusts chairman Roger Perkin.

Advisers used to avoid placing clients' funds directly in listed property unit trusts as they received no commissions, but with the promulgation of the FAIS Act they were required to put the interests of their clients before their own, Perkin said this week.
Financial advisers may previously have been inclined to encourage clients to put their money in investments whose manager paid the adviser a commission.

Now there was a trend towards clients paying advisers fees rather than investment vehicles paying advisers commissions.
As property unit trusts were traded on a stock exchange through stock brokers there was no advantage for advisers if their clients bought into listed property unit trusts directly, he said.

The positive and consistent performance of listed property unit trusts, the emergence of the advisory fee structure and the requirement for advisers to put their clients' interests first should lead to a shift of focus to the listed property unit trust sector.
Mariette Warner, fund manager of Stanlib Property Income Fund, was not as positive about the new law's effect on listed property. To advise clients to invest directly in listed property financial advisers would have to become share-selection experts.
Most financial advisers were not share-selection experts, and instead tracked the performance of fund managers of unit trusts that invested in the listed property sector for advisers' clients.

Warner believed most financial advisers would still choose fund managers of unit trusts rather than try to select stocks.
Warner said financial advisers could then waive brokerage fees in exchange for an advisory fee, which was cheaper for the client.

Aug 26 2004 07:35:41:000AM Nick Wilson Business Day 1st Edition