Advisers lack understanding of goals-based advice

A recent poll, which received 2,560 votes, found that 81.8 per cent of respondents do not think goals-based advice is here to stay. Meanwhile, 18.2 per cent believe it is. 

Speaking to ifa, chairman of the Association of Goals Based Advice (AGBA) Matthew Walker said the results are a reflection of the misunderstanding some advisers have on what goals-based advice actually is.

“Planners are drawing an incorrect conclusion on what is meant by ‘goals-based advice’,” Mr Walker said.

“Where I think we need to draw the distinction, and what may be more contentious in so far as it is different to the industry norm, is goals-based investing. Goals-based investing is different. It seeks to look forward – using a more flexible portfolio design methodology and dynamic asset allocation (DAA),” Mr Walker said.

“Rather than use just risk profiling to generate a generic strategic asset allocation (SAA) using historical data points, look for build investments that directly relate to what the client/investor wants. If you start with the goals of the investment, it may well be that you end up with a very different portfolio than what a SAA portfolio might deliver. Then again, it might not.

“It would be constructive to build the debate around the idea that every planner is providing ‘goals-based advice’ and that the point of difference to consider is should we, or how do we, deliver ‘goals-based investing'.”

Commenting on the poll, SMART Compliance principal Brett Walker told ifa that the results indicate a “lack of understanding of what is being discussed or a cynicism about the terminology".

“Most advisers focus on client goals. I think goals-based advice has been the norm for decades, especially away from institutions,” he said.