Head of intermediary distribution at Vanguard Investments in Australia Michael Lovett said Vanguard research completed in 2011 founds clients believe around 80 per cent of an adviser’s value lies in strategic help.
This includes things like budgeting, cash flow planning, estate planning, tax planning and structures, retirement planning, risk profiling and behavioural coaching.
“You should spend 80 per cent of your time on the advice piece and 20 per cent on asset allocation, but we see the opposite of that in the workshops we do,” Lovett told ifa.
“Good advice practices do this well.”
Clients place around 80 per cent of an adviser’s value on the strategic advice and around 20 per cent on the product and asset allocation advice. So if an adviser is placing their value on the investment side, they’re depending on market movements beyond their control, according to Lovett.
“You need to think about what you can control,” he said.
An adviser can’t control whether the Dow Jones drops five per cent overnight but, if that’s what they’re placing their value on, they can expect some calls from clients if that happens – whereas a client who feels they are getting their value on strategy may be less concerned by short-term market movements.
Advisers in larger dealer groups are likely to be part of a structure that has researchers who spend all their time researching managers while the adviser is seeing clients, making an even greater case for the use of model portfolios.
Lovett said dealer group heads he speaks to tend to prefer advisers to focus more on strategy than asset allocation.
It must be totally irrelevant to Mr. Lovett that asset allocation is reponsible for over 92% of investment return . Its not your adviser , accountant or stock broker thats for sure . Mr. Lovett states that ” This includes things like budgeting, cash flow planning, estate planning, tax planning and structures, retirement planning, risk profiling and behavioural coaching.
1. Cash flow planning – clients kick with the breeze and there are very feww that adhere to a budget if its put to them . 2. Tax planning and structures – thats what their accountant is meant to be doing . 3. Risk profiling – this is the biggest joke still doing the rounds . Clients are risk adverse when markets are on the way down and cock a hoop on the way up. Risk profiling is the most elastic methodology that this industry uses and resluts far too often in clients not reaching their goals and then blaming the planner . Assessing reaction to volatility would be a far better tool.