Treysta Financial Life Management executive director Mark Nagle spoke to ifa about how goals-based advice is a “horrible moving target” and is something his firm does not offer.
“I think it was an effort for the industry to change their focus away from selling product to bringing the offer back to being more client-centric, and people started coming up with something that was ‘goals-based’,” he said.
“Goals-based [advice] is all very well, but there actually is a behavioural finance/psychological issue which is called ‘affective forecasting’.
“It essentially means that as human beings we are actually flawed in terms of our ability to predict our own futures.”
Mr Nagle said some key lessons can be drawn from behavioural finance in recognising the flaws around goals-based advice, noting that, particularly in younger years, humans are really bad at predicting where their lives will be in 10 years’ time.
“If you ask a client to list a whole bunch of goals over the next 10 years, they’re likely to get that very wrong, and that’s an issue,” Mr Nagle said.
“You could end up saving for the caravan for your trip around Australia but when the time comes you can’t think of anything that you’d least like to do than travel in a caravan around Australia.”
Mr Nagle said the evolution of his firm has moved beyond goals-based advice towards a philosophy based around values.
“Your values are less likely to change over time, and if you create a financial framework around your values, that will give you the best likelihood of making good financial decisions,” he said.
Can goals based advice be successfully provided by advisers that are trained, controlled & run by an institution, such as AMP? IMO Maybe, to a degree, but not to the same extent as a non tiered adviser. We all know they are using this strategy to flog more product but will consumers know it, and what will be the price of their failure. It’s time we self regulate and request that the term product distribution adviser/ specialist or the like to become mandatory.
[quote=Anonymous]Some common sense at last! Not only are people inaccurate in specifying their goals, many are also quite vague. A lot of people say their goal is to “be more comfortable” or “do more with their money” or “to have more choices when I’m older”. They cannot narrow that down to a specific amount and specific timeframe. They shouldn’t be pushed into inaccurate specificity, for the sake of some corporate bureaucrat’s “goals based process”. Particularly if that process really exists to provide a smokescreen for inhouse product flogging.[/quote]
Part of the advice process (or should I say ‘value’) is holding clients accountable for thinking about what they want their future to look like, as they say ‘Fail to plan, plan to fail’. Show me a listed company on the ASX that doesn’t have a business plan, I wonder why?? I’m doubt the Board’s are saying, please don’t develop a business plan, things will probably just change down the track, lets just run without one, a much better idea!
I think the headline was designed to fire everyone up. Nothing in Mark’s article actually shows how or why goals based advice is a fad, he simply states that in his opinion it is flawed (which in no way proves it is a fad). I’m sure Marks strategy is proving very successful for his firm as it differentiates them. Time to move on. Now, where are all those bank advisers…
Totally agree with the comment Chris makes (and in fact many of you make) including the author Mark Nagel. I saw this model coming years ago and the reason I built The 360 Solution – Fit for Life program 2 years ago. It is a 7 stage digital ‘whole of life’ coaching program which looks at every element everyone has spoken about in these comments – Emotional Fitness, Health and Lifestyle Habits, Values (across many areas of a persons life), their Vision, Goals (across all aspects of their life which link to their values), Lifestyle Continuity Planning (insurance to protect goals), and tools to change habits & their mindset.
Its a facilitation vehicle for referrals into other industries and helps the adviser become a conduit for the clients entire life. Not just the financial elements.
Its all digital, fully integrated and available as a white label solution and Its now on the worlds best learning management platform so it has gamification and social walls etc.
It helps create additional revenue streams for an adviser, is a facilitation vehicle for setting up strategic alliances and allows the adviser to become a project manager for the clients life.
Oi, you lot. Stop biting each other’s heads off here.
You’re all arguing the same thing. What’s missing here is the context around what AMP are doing in their most recent campaign which they are marketing as ‘ground breaking’ which to us is nothing more than fiiiiiiiiiiiiiiiiiiiiiiiiiiinnnnnnnnnnnnnnally catching up and realising that setting goals are part of the process.
AMP are making the financial planning industry look bad by being so late to the party, but geez guys and gals, ease up on each other. You’re clearly all putting the client first, not product – this includes the author.
In the words of Finnick Odair in The Hunger Games “Katniss, remember who the real enemy is…”.
Put the two together and I think you are onto something.
Sorry Mark, but I think you are missing the point here. Yes, clients change their goals continuously but that is where the ongoing support of a good financial planner comes into play to monitor these and make the necessary changes. Products do come into this when safeguarding their income to ensure they achieve their goals regardless of what happens to them in the future as well as good investment products to suit their needs and goals.
If you don’t take into account their goals and what they want you are simply flogging a product off that will not necessarily benefit the client, and in turn, doesn’t meat the best interest duty.
Really Andrew? Is that what you read into this article? We go way beyond taking their goals into account, that’s the point I was trying to make. Values based is as deep as you can get to know a client, we use psychological techniques to assist us. Best Interest duty, my goodness the values based process certainly has that covered. Happy to expand but you’ve read this all wrong.
In 1962 Decca records rejected the Beatles because they said “guitar bands are on the way out”. People have been calling, and misjudging, “fads” for centuries.
So based on this theory, I assume Mark doesn’t set business goals and doesn’t work towards anything professionally or personally?
Goals based advice is something that great advisers have been doing for 30 plus years. That’s actually why we’re called Financial “Planners”. I disagree with Mark’s comments about goals based advice but can see where he is coming from. I think what he is saying is that Robo Advisers, the institutions (AMP/ Hillross) have now jumped on board and are using it as the latest sales tool to flog even more product. A similar process as to how once upon a time institutions used technical solutions to RBL problems and 8 different tax components as a solution to flogging more product. The problem with just jumping on board like AMP has done is that unless you understand the ”purpose” behind the goal it’s going to end in tears. I call it the yo-yo diet effect. A bit like having a poor personal trainer. You’ve got a goal to lose 10 kilograms but you’re continually in hitting and miss ultimately failing . What’s missing with Goals Based Advice promoted by Robo Advice and AMP, the Institutions, is the relationship required, obtained by an understanding of the clients ‘”purpose” and values to truly inspire clients to achieve their goals. Good advisers have been doing this for many years.
Ha. Totally true and the next evolution will be towards wellbeing focused life advice. Advice won’t be just about helping people get that next holiday or buy a new Audi, it will be how to help them lead more fulfilling lives and that does not just mean financial goals. Love it Mark
Yes, client goals do change over time. This is a given. This is why it is important to re-engage regularly with your client to capture these changes and project manage the strategy accordingly. Understanding a clients values and beliefs is also important as it helps the adviser prioritise the clients goals. I don’t see how you can dismiss goals based advise and still act in the clients best interest.
Mr Nagle, why else to clients come and see a Financial Planner other than to assist them to achieve their goals. Goals Based is not a FAD, it is instead what we as advisers should always be doing for our clients, ie. increase the certainty of achieving client goals. This could include life and disability insurance to ensure that their child goes to the preferred school regardless if the client is alive or not or in good health or not. It could also mean helping the client to live a comfortable life and holiday when they want regardless if a GFC type event occurs again by recommending a more suitable portfolio mix, it could be advice on their estate plan to increase the potential for their estate to be better protected and more tax effective and so on.
Interestingly…Mr Nagle’s firm’s investment philosophy (we we concur with) is:
“We believe that any investment strategy should be [b][color=blue]designed around our clients objectives[/color][/b] and values”.
Goals are objectives…it is what we want to achieve for ourselves and our clients.
In your caravan example, yes a client may change their mind, but better to have the cash for the caravan and use it somewhere else than not to. Your simplistic caravan example, is only (a small) part of the broader goals based advice process, again financial advice is about providing advice, outlining courses of action and helping clients to implement – to increase the certainty that their goals will be more likely achieved.
Yes good point. Fergus. Goals, Objectives, Priorities, ‘stuff i need to do’. However you frame it is all the same. The author’s view I think is based on this current trend that we can put $ figures, time frames, and tangible outcomes on all of these goals which is of course not true. I want to go travelling, when, where, how much? I don’t know, but I want to be able to go where I want when I want. Too often the goals based approach is “I want to go to Europe in 3 years time and it will cost me $30,000”, that’s not how people think, in this example the goal is to have the financial freedom to be able to go next year, in 3 years or in 5 years and spend $10k or $50k.
John I don’t necessarily disagree with ALL of Nagle’s comments, except that he generalised too much and YES he is incorrect GOALS BASED advice is not a FAD. A client’s values by default are taken into account when helping them to achieve goals, for example to maximise the value of their estate and ensure that their family’s financial (and by default life-style) position is secure a client will be advised to structure their estate in such a way as to increase the certainty of this goal being achieved – this reflects the client’s values in terms of the importance of family. This is goals based advise with no specific time frame (unless you know when the client is going to die) nor specific money amount. Recommending a portfolio approach that reduces downside risk may assist the client to achieve their specific and non-specific goals as they will have more certainty about the value of their capital regardless of investment events. Again GOALS BASED advice is not a fad, is it what all advisers should be doing.
I think you are being a little harsh.
At its heart all advice must be goal based so gba is nothing new. However I have yet to meet a client who actually has s financial goal. They all have lifestyle goals which drive a need for a financial solution. Teasing out the underlying values to help align these with the goals is the key to best advice.
Some common sense at last! Not only are people inaccurate in specifying their goals, many are also quite vague. A lot of people say their goal is to “be more comfortable” or “do more with their money” or “to have more choices when I’m older”. They cannot narrow that down to a specific amount and specific timeframe. They shouldn’t be pushed into inaccurate specificity, for the sake of some corporate bureaucrat’s “goals based process”. Particularly if that process really exists to provide a smokescreen for inhouse product flogging.
Hey “Stupid Article” put your name to your comments next time….. for what it is worth I agree with your view. Mark I would be interested to see how your Values based advice works in reality… We provide Goals Based advice by working backwards from a specific goal…. e.g We want to buy a home worth X and pay it off in Y years…. How would you do that in a Values model?
Hi Steve, wow that little article has stirred a few people up! Thank you for pointing out the anonymity element btw. Your example re buying a home is an excellent one to think about from a values-based perspective. Firstly are your clients buying a property for the right reasons? Or are they responding to socially imposed value sets? Or is family putting pressure on them to get into the property market. By working with the clients to help them understand and consider their values you can at least help them be sure they have framed the decision to buy a home/property in a healthy manner. Moving on from there, how much should they spend? Again understanding their values will really help here, otherwise they are likely to borrow the maximum amount they can and then go and buy the least worst house available for the money. This is where things can start to break down, people over-stretch themselves and other areas of their life suffer which leads to reduced levels of well-being. Once these excellent conversations have occurred you can pick up exactly where your firm does and do a great job of helping the clients act on the objectives they have set. Hope that makes sense.
I still find Mark that most planners don’t know the difference between a Goal, a strategy, an objective or a purpose or values. A great person once said “with a purpose in place, decision making becomes easier. You can look at an opportunity or a challenge and ask yourself, “Is this the right thing to do given our purpose?” It’s when you link the goals and the purpose you get great outcomes for the client.
Ok cool…so in our world we call what you’ve articulated above a “Values Based Decision” around the Goal. But the Goal itself still needs “Goals Based Advice”. I think we effectively do exactly the same thing as you guys (we use a Values matrix to help them stress test their goals).
Whichever label you put to it the approach you’ve articulated is what I’ve always thought Financial Planning/Advice was….. I have never liked advice where the tail wags the dog..which might be what you are referring to. Example is Adviser is comfortable in Super/Shares, and thinks it is the best place for savings – so they manufacture a whole process to “help” the clients decide that Salary Sacrificing and Margin Lending into Managed Funds is the best way forward for them….
We have a client whose previous adviser did just that…only problem was the “Goal” the client went to them about was buying a property in 4 years…… we had to unwind the strategy and re-educate the client…
You’re example is a classic case why organisations like AMP, out their flogging goals based advice as if it’s the latest thing since sliced bread, and their so unique.. should make us all cringe. The majority of advisers want to help clients reach goals. It cheapens the experience and is now a tainted process now that AMP is involved.
Why is IFA giving this guy a platform to rant?
Mr Nagle you’re stating the obvious. Nobody can predict the future. But to dismiss goals-based advice as a ‘Fad’ on this basis is wrong IMO.
Helping clients set smart and realistic goals and providing advice that improve the likelihood of achieving these goals is how good financial planners have been doing it since before FOFA / FSR. So to say it’s a fad is just stupid. Are you saying that best interest and appropriate advice is a fad too?
Oops touched a nerve