ARTICLES

During the last 30-40 year investment period, investors have been spoilt by an unusually favourable period for investments and asset prices. Following the high inflation and low growth period of the 1970s – when stocks and bonds did very poorly – inflation pressures finally subsided as did high interest rates. Furthermore, we had a massive period of peaceful prosperity and globalisation, enabling lower prices and greater economic efficiency. This created excellent conditions for most asset classes to flourish and with it growth orientated static Strategic Asset Allocation (SAA) portfolios and low-cost index funds.

The idea that we should invest to meet our needs and goals is basic common sense. However, somewhat surprisingly, that is not what most players within the investment industry do.

Are you looking to service more clients efficiently, while still meeting each individual's unique investment needs? A Managed Account can do just that, leaving you with more time and resources to nurture your business.  

Part 1 of this article examines why advisors are increasingly moving to outsource the investment function of their financial planning business when implementing a goals based investing approach. The next step is to consider a suitable investment and administrative structure that will support the advisor in delivering the key objective of goals based investing; tailoring each client’s portfolio to ensure it meets their unique objectives.

Equity markets have bounced well over 20% since the lows just over a month ago, so technically we are already in a new bull market. 

With peak new cases now behind us, the economy agitating to reopen and governments starting to ease restrictions, is the massive fiscal and monetary stimulus in the pipes about to prove the bulls spectacularly right?

The purpose of any advice business is to help its clients to achieve what they want to achieve. So, why is talking about goals-based advice seen as being 'different' from what financial planners have always done?

Sequencing risk is one of the most important things to consider when constructing your investment portfolio.

In short, advisers are more likely to succeed in meeting their client’s financial needs by adopting a Goals Based Investment (GBI) approach that encompasses dynamic asset allocation, than by following the traditional risk-based strategic asset allocation methodology that has been common practice over the previous few decades.

The premise of Goals Based Investing is to focus each investment portfolio on specific individual personal and lifestyle goals. Those goals inform the right timeframe, risk and return parameters, which in turn determine the best asset allocation and investment mix. Goals can be short-term, such as taking a holiday, medium-term, such as renovating or paying school fees, and long-term, such as saving for retirement.

Goals Based Investing (GBI) continues to gain recognition and be better understood amongst advisers. In his article Goals Based Investing: Should it be the norm? Giuseppe Ballocchi describes GBI as the way of the future for financial advice. Are we finally seeing a shift from the more traditional Strategic Asset Allocation approach to GBI? The simple answer is yes. Why, because it makes sense. Client goals should determine investment decisions. And, there is a rising school of thought that SAA investing will not suit likely market conditions going forward.