The new rage in financial planning is “goals-based advice”, so as I believed that is what should already be happening, I decided to go along to the Association of Goals Based Advice conference last week to see what the hype was all about.
Goals-based advice is not defined and means different things to different people. However, at the core is the belief that the adviser is engaged by the client to help them come up with strategies to achieve their objectives. Again, I was struggling to see how this should be a new concept.
After spending nearly 20 years in this industry you become very cynical, so after 20 minutes I threw these guys into the same group as the “fee-for-service” zealots. That is, they are applying a label to effectively degrade others within the industry that do not have that same label as a means of promoting their own services. In short, a marketing stunt. So off I rant, yet another group of advisers sending mixed messages to the public and we wonder why a large portion of the community don’t understand what we do.
They were using the word “new” a lot, which I felt was disingenuous as there was absolutely nothing “new” being discussed. I then reiterated to my colleagues at the table how can any advice be in the best interests of the client if it does not satisfy the client’s objectives? If it doesn’t satisfy this then it is illegal, so why do we need an organisation applying yet another divisive tag within the industry participants?
However, after a while it became apparent this was not what I had suspected.
These were a group of advisers and industry participants that have acknowledged the past of our industry and a large portion of those within it. When you discuss Storm and other bad behaviour done by the banks or financial advisers it is an indictment on all of us. This is probably why our perception by the public is so poor and exactly why legislation like FOFA was brought in. Saying that’s not me, is not an effective public relations tool for the industry as a whole. Whilst as a firm we had to change very minimally the way we did things under FOFA, as this is fundamentally sound legislation, we don’t want to risk the next batch of government “help” on our business.
If associations like this can assist in the PR of our industry, be it with the public or the regulator, to garner trust then I think the idea has merits. I would caution the association not to be narrow in their terms or too prescriptive in the approach. This will ensure that a range of advisers offering different methods to achieve the client’s goals can be part of the collective. I would also resist the temptation to market it as a “new” approach and simply make achieving clients objectives an emphasis for the group.
The underlying outcome of achieving client’s goals can be achieved in many different ways, and it is this outcome that is of paramount importance to the clients. Indeed, the lesson to learn from the “fee-for-service” zealots is that there are many ways an adviser can offer a service to a client in a way that satisfies them in achieving their goals. If there is adequate disclosure, it is legal and there is agreement because the client sees value, then that is exactly how the free market operates and is a positive for our industry as consumers have choice.
Robert Coyte is chief executive of non-bank licensee Shartru Wealth.
Agreed Rob! Mapping client lifestyle goals to their investment strategy is not a new concept. I would assert most advisers have been doing this for years. However, technology will make it easier to track progress. I do have concerns, however, that the term is being applied to CPI+ portfolio styles. These are not goals based ADVICE. They are asset allocations which have a goal of exceeding CPI. Two very different things. Labelling an investment portfolio CPI+5% does not make it more likely to meet the clients personal financial goals than previous investment styles. I think the industry would be wise to use different terminology to avoid confusion.
its nonsense and just marketing at best. Investment advice is investment advice. Yes goals form part of it but its not the be all of advice.
I wonder if the GBA people will take the next step of lobbying ASIC to enshrine the words “Goals Based Advice”, so that GBA association members are the only ones allowed to use those words or anything even remotely similar in meaning. Then hey presto, you’ve got government enforcement of a contrived marketing gimmick to generate private profits! It’s not as if it hasn’t been done before by certain people who frequent these pages.
Hi Mr/Mrs Anonymous, you might like to know that AGBA is a not for profit with 100% of income spent on helping planners, so your cynicism is off the mark. Suggest you look us up before jumping to such conclusions. Happy to chat any time.
When I read about the new ‘GBA” phenomenon, I began to wonder what purpose I imagined I might have had over the last 40 years. Maybe the Association could survey my clients to see if their stated Lifestyle objectives had been satisfied over the journey
Rory I thought the same thing which is why I felt it necessary to write this piece.
I think the idea has merit for reasons I mentioned in the article and as long as the process is inclusive of all advisers doing the right thing then it could be a very important step in building trust with regulators and more importantly the public. I definitely don’t want to see another wedge driven between the good advice providers within the industry and yet another mixed message given to the public.
Of course goals based advice is the foundation of planning. What else would planning be? I think its good though that at least we, the planners, are starting our own conversation about how we get better advice to clients. Who cares what it’s called. “Goals based” is as good as anything, particularly as it leads to more focus on the client. People who say goals based is a fad or marketing racket might just be missing the point.
If the point is to help everyone and build a better industry, then I’m all for it, however you may choose to do it.
I guess we just need to decide whether we want in on the journey or just continue to do the same thing for the same results?
Good post Robert, even if I am a fee-for-service zealot! 😉
Thanks Adam and great we can be on the same page 🙂
AMP has run Goals based investing with “plus this and that “above inflation , Its all crap ie a guess and new marketing tool . I cornered the AMP speaker after and said “oh yes the standard AMP balanced index fund killed the new Goals based one in the past ” …. They don’t benchmark with the Index now as they struggle to “add value” for their higher more expensive MER.
There is a distinction drawn between “goals based advice” and “goals based investing”.
I think it is prudent be cynical in regards to the sudden change of benchmarks of fund managers as a result of “goals based investing”. This is particularly interesting with the CPI plus ? approach as the world under QE has seen markets power through these usual parameters. However, markets always normalise and regardless of what people say I am sure this time will be no different.
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