A 37-year veteran of the industry – now drawing heat for predicting a real estate crash -- is sharing what it all means for advisors.
Richardson GMP advisor Hilliard MacBeth has been on an Eastern Canada media blitz the last couple of days in support of his very controversial book, When the Bubble Bursts, a look into why Canadian housing prices are set to fall by as much as 50 percent.
“It will affect all of us,” says MacBeth. “Even the advisors that have a higher percentage of high-net-worth people, what they’re going to find is that it affects everybody because all of our clients are going to be stressed out about the real estate crisis.”
MacBeth’s thesis is a thorough analysis as to why history is about to repeat itself. However, lost in this real estate discussion (WP sister publication Canadian Real Estate Wealth magazine covered the real estate angle on Thursday) is the domino effect that will hit advisors of all stripes in every part of Canada but most especially in Vancouver, Toronto, and Calgary, the hot spots for residential real estate.
If you think CRM2 is problematic, the systematic halving of home prices in this country could create a chaotic situation for advisors when a huge swath of clients, whose single biggest asset is their home, see their net worth cut by as much as 70 percent or more.
In this scenario the risks to advisors are significant.
#pb#
“The TFSA is going to be the biggest problem because you can pull your money out with no penalty to shore up their real estate,” says MacBeth, “and even people will cash in their RRSPs in order to shore up their real estate which is absolutely the wrong thing to do. They should do the exact opposite.”
“This is the nightmare scenario for [advisors]. If you’ve [the client] got extra real estate, sell it now, while it’s still good because I don’t want you coming to me in two years saying you’ve got to cash in your RRSPs and TFSAs.”
Skeptics might say MacBeth wrote his book out of self-interest which is a fair argument until you consider that he manages $220 million in assets for almost 200 high-net-worth households and has seen numerous corrections both in real estate and equities in almost four decades as an advisor.
He’s genuinely worried that clients, including his own, could face serious consequences should they try to ride out a significant correction while holding on to excess real estate.
I’m sure there are lots of real estate professionals in Toronto who are scoffing athis predictions and while they might not come to fruition, advisors are wise to at least have a plan B.
For your clients… and for yourselves.
“It will affect all of us,” says MacBeth. “Even the advisors that have a higher percentage of high-net-worth people, what they’re going to find is that it affects everybody because all of our clients are going to be stressed out about the real estate crisis.”
MacBeth’s thesis is a thorough analysis as to why history is about to repeat itself. However, lost in this real estate discussion (WP sister publication Canadian Real Estate Wealth magazine covered the real estate angle on Thursday) is the domino effect that will hit advisors of all stripes in every part of Canada but most especially in Vancouver, Toronto, and Calgary, the hot spots for residential real estate.
If you think CRM2 is problematic, the systematic halving of home prices in this country could create a chaotic situation for advisors when a huge swath of clients, whose single biggest asset is their home, see their net worth cut by as much as 70 percent or more.
In this scenario the risks to advisors are significant.
#pb#
“The TFSA is going to be the biggest problem because you can pull your money out with no penalty to shore up their real estate,” says MacBeth, “and even people will cash in their RRSPs in order to shore up their real estate which is absolutely the wrong thing to do. They should do the exact opposite.”
“This is the nightmare scenario for [advisors]. If you’ve [the client] got extra real estate, sell it now, while it’s still good because I don’t want you coming to me in two years saying you’ve got to cash in your RRSPs and TFSAs.”
Skeptics might say MacBeth wrote his book out of self-interest which is a fair argument until you consider that he manages $220 million in assets for almost 200 high-net-worth households and has seen numerous corrections both in real estate and equities in almost four decades as an advisor.
He’s genuinely worried that clients, including his own, could face serious consequences should they try to ride out a significant correction while holding on to excess real estate.
I’m sure there are lots of real estate professionals in Toronto who are scoffing athis predictions and while they might not come to fruition, advisors are wise to at least have a plan B.
For your clients… and for yourselves.
