What is objective-based financial advice and why should you seek it?

(Feedsy Exclusive)

Objective-based financial advice has become hugely popular over the last few years in Australia. How does it differ from more traditional financial advice and why should you be asking your adviser about it?


The difference between traditional and objective-based advice

Traditionally, financial advice has tended to be more general – the ways in which you’ve been advised to invest your money have been based on assessing risks to work out the chances of the best financial outcomes. However, this strategy doesn’t take into account your own personal needs and goals for the different stages of your life.

Objective-based advice requires your financial adviser to take a much more in-depth look at who you are, what stage in life you are at, and what your short, medium and long-term goals are. This enables them to draw up a financial strategy that’s individually tailored to you. The aim is to equip you to meet all your current and future financial commitments and achieve the lifestyle you aspire to by making the money you have now grow to provide you with the life you want in the future.


The benefits of objective-based advice

The main benefit of objective-based advice is that it doesn’t make generalisations – it actually looks at who you are. People’s financial goals are likely to be very different depending on their individual circumstances.

For example, a couple with no dependents are more likely to aspire to have a stable income in retirement, with enough left over for the things they enjoy, such as holidays. A couple with children are much more likely to want to leave something behind for their children to inherit, so they’ll be more concerned about putting money away. Objective-based advice will not treat these two couples the same way or use similar investment strategies for both of them, as they want very different outcomes.

The other main benefit of objective-based advice is that it enables you to build a much more trusting relationship with your financial adviser due to their better understanding of you. This makes it more likely that you will listen to their advice.


How can defining your objectives help you control your financial future?

Defining your goals is a vital part of planning for the future. Writing down a specific plan with a financial professional will help you to establish what your goals are, and give you a permanent written reminder of them. This gives you a focus and an understanding of the steps you have to take so that you can achieve the lifestyle you want.

This is likely to help you curb impulse spending, as reminding yourself of your goals is a powerful motivator. Once you have something tangible to work towards, you’ll be willing to forego other things in order to make your dreams happen. For example, you’ll probably be happy to live without an expensive holiday this year if it means you’ll be living in your dream home a couple of years down the line.

This is another reason why objective-based planning works – it takes into account your short- and medium-term goals as well as just those for the long term. Once you have defined your objectives, your financial adviser will draw up an investment plan designed to give you the returns that are most likely to help you achieve your immediate goals as well as your plans for the future. This means you’ll see results quickly, which will keep you motivated for the future.

In addition, having a clearly-defined plan will help you to keep your goals realistic. A lot of people become disheartened by having impossible dreams that they have no way of achieving. A good financial adviser will be encouraging but realistic about the goals you should be setting yourself, which will put you in greater control of your finances from the outset.


How often should you review your financial objectives?

There is no definite answer to this but it’s essential to review your objectives regularly, as they’re likely to change along with your circumstances at different stages of your life. However, you should avoid making unnecessary changes to your objectives – your plan should be a map that will ultimately take you where you want to go, without leading you off-course.

It’s advisable to review your plan at least once a year, and at any other time when things change in your life, such as getting married or starting a business. Major life events are likely to change your financial goals. It’s important to make sure you have a plan that continues to meet your needs as you journey through life.

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