Product versus Goals Based Advice

Check the transcript of the video here:

Hello. I’m Maciej Stanek, Senior Financial Adviser and Director at Véurr. There seems to be a disconnect between what clients understand financial advisers can help them with and what advisers actually do. Our aim is to help you achieve your goals with the right mix of products and advice. Let me explain. I recently had a discussion with a potential new client. This client had $80,000 in a bank account, which had not been touched for many years, and she decided it was time to invest it. The client wanted to know what to invest her money in. So I asked what she was hoping to achieve. She said, ‘I just want to know what to invest in to get the best return.’

My response was, ‘Why? What will be the purpose of the money when you get that return?’ The client response? ‘I don’t know. I just want to know what will go up the most.’ For contrast, let’s compare this conversation to one someone might have with their GP. A patient walks into the doctor’s office with a huge lump on the side of their neck and says to the doctor, ‘Doc, can you give me the best painkiller as my neck hurts?’ Doctor’s response is: ‘Why do you want a painkiller? Perhaps we should run some tests and figure out why your neck hurts? Then we can deal with the problem rather than just treating the symptoms.’

As you can appreciate, the doctor would not just prescribe painkillers – the doctor’s ‘product’ in this case. They would investigate why the patient has a lump on their neck and recommend the appropriate treatment to help the patient get better. It’s about the goal of getting better, not necessarily choosing a particular product. It’s the same with financial decisions. I can tell you that every investment is a product and different products have different characteristics.

Some products are suitable for what you want to achieve, and some are not. If we can establish a realistic financial goal, then I can help you choose the most suitable products to get there. In the case of the original client with the $80,000, I suggested we needed to think about her goals differently.

For instance, how much money does she need to be financially free? How much does a comfortable lifestyle cost? Once we have this baseline, we can figure out what combination of assets and products can help her meet the cost of her comfortable lifestyle. The next step is the timeframe. Say she wants to achieve this goal in 20 years, then we can work backwards to figure out: her starting situation, what she’s willing to regularly contribute to help achieve her goal what is the minimum required annual return on her capital to get her there.

Only once we’ve established these projections can we talk about which products are more suitable for the individual to help them achieve these goals. For instance, some clients have no interest in shares. Some only feel stress-free when they have their money in a property so they can drive past and see it. Some clients have no interest in excessive debt and they want to build up their wealth through regular contributions from their cash flow. Some clients have a tax problem if they choose the wrong product, while others will compromise on potential entitlements if they elect to invest in a way that just saves them tax.

It is only when an individual’s goals and circumstances are understood that products should be discussed. They help achieve the goal. They are not the goal itself.

HEAD OFFICE

Level 2, 11 National Cct
Barton ACT 2600
02 6171 1777
infofp@veurr.com.au


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