The second session at the IMAP Investment Forum was a presentation on how managed accounts work in a goals based practice, by Matthew Walker CFP® - a director at WLM Financial.
According to Walker, goals based investing is an investment methodology where performance is measured by the success of investments in meeting an individual’s personal and lifestyle goals. He said this differs from conventional investing methodologies, where financial performance is defined as a return against an investment benchmark.
In prefacing his presentation, Walker said the top four things clients want out of the financial planning process were:
- Peace of mind;
- A clear understanding of what is going on (with their investments/portfolio);
- For the planner not to lose their money; and
- Good returns.
“Interestingly, good returns ranks fourth on the list - not first,” Walker said. “Clients aren’t expecting their planners to be investment managers. Clients want planners to hep them achieve their goals.
“That’s why we outsource our portfolio management and administration, to enable our planers to focus on our core services, which is looking after our clients.”
Walker believes when the industry talks about ‘risk’ to clients, it’s often the wrong type of risk, like sequencing risk or volatility risk. Instead, he said the “real risk” for investors was not achieving their investment goals.
“A good planner helps clients to identify, understand and manage their goals,” Walker said. “And goals based investing is about actively managing portfolios to meet the goals and objectives of clients. Goals based investing also helps to address behavioural finance issues, by directly linking the investment portfolio to the client’s goals.”
For planners considering a goals based portfolio, Walker recommended the following:
The portfolio must relate to the client’s needs;
Market indices have no relevance to client goals or objectives;
Appropriately targeted and risk diversified multi asset portfolios; and
The asset allocation range needs to be broad and flexible.
“For WLM Financial, managed accounts are the most efficient way of providing goals based investing, as they provide our clients with individual investment management in a scaleable and transparent way,” Walker said.
“As our planners have more time to focus on their clients’ goals, our clients have stopped talking about investments. Instead, we now have deeper conversations about their objectives. Our clients are more satisfied and have peace of mind with our goals based approach to advice.”
The IMAP Investment Forum is a community of interest for dealer group researchers, investment teams and independent researchers, where they can hear and learn from specialist portfolio managers and chief investment officers of advisory businesses. These experts and advisory professionals provide their insights on the practical issues involved in implementing managed accounts in an advice business.