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Examining personal financial advisors’ knowledge, client recommendations, and personal investments in private real estate and real estate investment trusts (REITs)

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Abstract

Real estate investment trusts (REITs) have gained considerable investment participation and academic research. However, little is known about personal financial advisors’ knowledge, perceived benefits, personal investments, and client recommendations related to public REITs, private REITs, and private real estate investments. This research extends the real estate investment literature by examining all of these unknowns, offering insight into financial advisors’ knowledge of real estate investments, client recommendations, personal investment decisions, and financial institution performance resulting from such knowledge and practices. The results show that financial advisors have moderate levels of knowledge public REITs, private REITs, and private real estate investments. It is further shown that the perceived investment benefits translate into personal investments by financial advisors but not necessarily client recommendations. Specifically, financial advisors’ perceived benefits of private REITs and public REITs were significantly related to client recommendations but private real estate investments were not. The disconnect between personal investment decisions and client recommendations is interesting and may be due to the capital requirements, property management expertise, and risks associated with private real estate investments. The research also showed that only private REIT recommendations were positively associated with financial institution performance.

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Authors and Affiliations

  1. Hill & Levene Schools of Business, University of Regina, Regina, SK, Canada

    Grant Alexander Wilson

  2. Avenue Living Asset Management, Calgary, AB, Canada

    Jason Jogia

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  1. Grant Alexander Wilson
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Appendix 1: Questionaire

Appendix 1: Questionaire


Please answer the following questions based on your financial institution (Financial Institution Demographics).

  1. 1.

    What is your primary operating location (world region)?

    ________________________________________

  2. 2.

    How many years has your company been in business (company age)?

    ________________________________________

  3. 3.

    What is the approximate number of clients (company size)?

    _________________________________________

Please answer the following question based on your experience as a financial advisor (Advisor Demographics).

  1. 4.

    How many years have you been employed as a financial advisor?

    _________________________________________

Please answer the following true/false questions about public REITs (Knowledge of Public REITs).

  1. 5.

    Public REITs are required by law to distribute a significant portion of their earnings as dividends to shareholders.

    1. i.

      True

    2. ii.

      False

  2. 6.

    Public REITs primarily invest in real estate properties, generating income solely from capital appreciation property sales.

    1. i.

      True

    2. ii.

      False

  3. 7.

    Investing in public REITs allows individuals to diversify their real estate holdings without having to directly own properties.

    1. i.

      True

    2. ii.

      False

  4. 8.

    Public REITs offer higher growth potential compared to traditional stocks since their performance is closely tied to the fluctuations in the stock market.

    1. i.

      True

    2. ii.

      False

  5. 9.

    Public REITs are legally required to invest in residential properties.

    1. i.

      True

    2. ii.

      False

Please answer the following true/false questions about private REITs (Knowledge of Private REITs).

  1. 10.

    Private REITs are traded on public stock exchanges.

    1. i.

      True

    2. ii.

      False

  2. 11.

    Private REITs are subject to the same level of regulatory oversight and reporting requirements as public REITs.

    1. i.

      True

    2. ii.

      False

  3. 12.

    The value of shares in a private REIT is determined by the net asset value of the underlying real estate properties.

    1. i.

      True

    2. ii.

      False

  4. 13.

    Private REITs are generally considered to be risk-free investments due to their focus on stable and income-producing real estate assets.

    1. i.

      True

    2. ii.

      False

  5. 14.

    Private REITs generally have less liquidity compared to publicly traded REITs.

    1. i.

      True

    2. ii.

      False

Please answer the following true/false questions about private real estate investments (Knowledge of Private Real Estate Investments).

  1. 15.

    Private real estate investments often involve direct ownership of physical properties such as residential homes or commercial buildings.

    1. i.

      True

    2. ii.

      False

  2. 16.

    Private real estate investments are typically less liquid than public REITs.

    1. i.

      True

    2. ii.

      False

  3. 17.

    Private real estate investments tend to have a lower level of volatility compared to investing in individual stocks.

    1. i.

      True

    2. ii.

      False

  4. 18.

    Private real estate investments can potentially benefit from both rental income and property value appreciation.

    1. i.

      True

    2. ii.

      False

  5. 19.

    Private real estate investments often require a higher initial capital investment compared to other investments.

    1. i.

      True

    2. ii.

      False

Please answer the following questions based on your perceptions of the three real estate investments (Perceived Benefits and Risks).

  1. 20.

    To what extent do you perceive the benefits of public REIT investments.

    1. i.

      To no extent

    2. ii.

      To a small extent

    3. iii.

      To a moderate extent

    4. iv.

      To a considerable extent

    5. v.

      To a great extent

  2. 21.

    To what extent do you perceive the risks of public REIT investments.

    1. i.

      To no extent

    2. ii.

      To a small extent

    3. iii.

      To a moderate extent

    4. iv.

      To a considerable extent

    5. v.

      To a great extent

  3. 22.

    To what extent do you perceive the benefits of private REIT investments.

    1. i.

      To no extent

    2. ii.

      To a small extent

    3. iii.

      To a moderate extent

    4. iv.

      To a considerable extent

    5. v.

      To a great extent

  4. 23.

    To what extent do you perceive the risks of private REIT investments.

    1. i.

      To no extent

    2. ii.

      To a small extent

    3. iii.

      To a moderate extent

    4. iv.

      To a considerable extent

    5. v.

      To a great extent

  5. 24.

    To what extent do you perceive the benefits of private real estate investments.

    1. i.

      To no extent

    2. ii.

      To a small extent

    3. iii.

      To a moderate extent

    4. iv.

      To a considerable extent

    5. v.

      To a great extent

  6. 25.

    To what extent do you perceive the risks of private real estate investments.

    1. i.

      To no extent

    2. ii.

      To a small extent

    3. iii.

      To a moderate extent

    4. iv.

      To a considerable extent

    5. v.

      To a great extent

Please answer the following questions based on your professional recommendations (Client Recommendations).

  1. 26.

    Would you recommend public REITs to your clients?

    1. i.

      Yes

    2. ii.

      No

  2. 27.

    Would you recommend private REITs to your clients?

    1. i.

      Yes

    2. ii.

      No

  3. 28.

    Would you recommend private real estate investments to your clients?

    1. i.

      Yes

    2. ii.

      No

Please answer the following questions based on your personal investment decisions (Personal Investment Decisions).

  1. 29.

    Would you invest in public REITs?

    1. i.

      Yes

    2. ii.

      No

  2. 30.

    Would you invest in private REITs?

    1. i.

      Yes

    2. ii.

      No

  3. 31.

    Would you invest in private real estate?

    1. i.

      Yes

    2. ii.

      No

Please answer the following question based on your investment firm’s performance.

  1. 32.

    What best describes your investment’s firm relative to its competitors?

    1. i.

      Significantly below average

    2. ii.

      Below average

    3. iii.

      Average

    4. iv.

      Above average

    5. v.

      Significantly above average

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Wilson, G.A., Jogia, J. Examining personal financial advisors’ knowledge, client recommendations, and personal investments in private real estate and real estate investment trusts (REITs). J Financ Serv Mark (2023). https://doi.org/10.1057/s41264-023-00255-3

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