Originally published | 23rd September 2016
What do most compliance managers, or quality assurance managers, question when discussing the quality of advice?
Does the recommended strategy meet the client’s goals?
The invariable discussion is that in the fact-finding stage of advice, you the adviser, must document the client’s goals. These goals must be specific, measurable, achievable, realistic and timely.
But this is only part of the discussion, and it is a part that is actually overshadowing other key components of uncovering the relevant personal and financial circumstances of the client.
Why is there such a focus on goals, when the Legislation clearly states in Section 961B(2)(b)(ii) that the adviser must identify “the objectives, financial situation and needs of the client that would reasonably be considered as relevant to advice sought on that subject matter”
Before I am pelted with tomatoes, I get it. The word “needs” can be interchanged with the word “goals”, but what about “objectives”?
So, What about Objectives?
Objectives are not just about destinations, or achievements, but they are also ways that clients want things done with their finances.
Objectives can highlight to the adviser how to structure certain recommendations in order to achieve needs and goals.
So, What’s the Difference?
To me, it is really quite simple. All three, goals, needs and objectives, are important to deliver quality advice. But you can’t focus on one, without the others.
A goal is a destination that the client wants to get to. Be it retirement at age 65, a holiday to Las Vegas or purchasing a house, it has a timeframe that it needs to be achieved and has a monetary value associated.
A need is something that the client has to have. It could be protection of assets in the event of death, protection of income in the event of sickness. Even though they may have a monetary value, needs are generally non-negotiable.
An objective is a way that clients want things structured in their finances. It could be to minimise cost of their superannuation, or to make their finances easy for their family to access in the event of their death.
Objectives may not have a monetary value, but if you don’t understand them, how do you structure a financial plan adequately?
How do they tie in together?
A couple of years ago, my family took a five-week trip to the U.S. It was fantastic and we had so much fun and saw so many things.
But when I look back, I can actually tie goals, needs and objectives into the trip.
Well, the goal was to go to the U.S.
The needs were the airline tickets, accommodation, travel insurance, car hire, etc.
The objectives? Well to me, they were the places that we wanted to visit along the way.
If we didn’t have the objectives of going to the Grand Canyon, or the Statue of Liberty, or the Capitol Building in Washington D.C. we wouldn’t have known what we were going to do in each place we stayed.
So next time you are discussing goals with your clients, make sure you take note of their objectives.