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Seeking financial advice is more essential than ever

Seeking financial advice is more essential than ever

I read a lot of economic commentary and almost all of them state that financial (investment) assets are in a huge bubble at the moment. I heard one portfolio manager refer to markets living in ‘Lalaland’! If this is the case, we can easily see significant asset value drops which, in truth, have already started. It is more important than ever that you have a plan and stick to it.

Research in behavioural economics shows that one of the key reasons for not sticking to a plan or goal is a failure to consider personal motivations and lack of coaching. An approach that can help someone stick to a plan is known as the ‘Backward Planning Process’. BPP is a process that starts from the end of a problem and works back in time to determine the sequence of optimal actions, a plan.

Here’s how it works

Step 1: Define your goal.

Step 2: Identify the steps and sequence needed to achieve your goal.

Step 3: Create a deadline to achieve your goal.

Step 4: Seek support to stay accountable.

Goal setting for retirement

Applying this process to retirement planning means that you need to start by asking what a successful retirement means to you. Only by defining your goals can you create a strategy to achieve them. We know that planning for retirement can cause a significant amount of worry. In these uncertain economic times, pre-retirees face the significant risk of a downturn in the value of their super and/or investment portfolios at the absolute worst time.

The difference between a risk vs goals based approach

Using the traditional risk-based investment approach, which determined how a client’s assets are invested based on their risk profile, success is measured by comparing returns against market benchmarks. Suggesting that clients should be pleased with negative returns, provided they are less negative than the benchmark! This approach also entails a high level of volatility that can decimate a client’s capital, particularly if they need to access their funds in the near term.

A goals based approach (GBA), such as the process adopted by WLM Financial Services, builds your plan, and subsequent retirement portfolio, by defining the goals that are meaningful to you and then work backward. Having your super or personal investments managed towards your financial goals using forward-focused Goals Based Investing places emphasis on specific outcomes, rather than on just an association with your risk tolerance. The outcome of the GBA approach is a higher probability of meeting your specific goal/s with a lower chance of negative returns.

Value beyond Investments

Financial advisers are mostly thought of in association with the management of investments, superannuation and financial insurances. However, the value that the best financial advisers provide extends far beyond this scope.

Your financial adviser should be equipped to provide advice, guidance and hands-on management that impacts every part of your financial life.

  • Cashflow management - having the money you want, when you want it
  • Wealth management - targeted investments to help achieve what you want
  • Retirement planning - making sure you have sufficient funds to live a comfortable retirement
  • Insurance planning - comprehensive needs analysis that matches the level and type of cover to protect you and your family
  • Estate planning - structuring your financial affairs, so your wealth ends up in the right hands
  • Administration - managing your financial paperwork administration burden in a timely and efficient manner

They should also facilitate discussions with a qualified tax adviser to help structure your affairs on ways that result in the most tax-effective position.

Most of all, the best financial advisers provide their clients with a clear and realistic undertaking of their present and future financial situation. They help to set direction and help to keep you on track and adapt to changes.

The psychological impacts of developing understanding and direction are often liberating. While everyone is different, many people find managing their finances confusing. Some lack the motivation to stay focused on their finances. For others, it’s simply a lack of time.

It is a common truth that most people spend more time focusing on their income than they do on making their money work for them.

These are all changes that a financial adviser can make that will benefit your life now and in the future.

Find out more about our Financial Planning services or book a meeting for a friendly follow up.


Now is the time to get smart financial advice
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