Goals in rand terms often don’t resonate
MOTIVATE: FIND WHAT MATTERS TO CLIENTS
Financial planners must translate need for a financial plan into what’s meaningful for clients, such as shorter working lives.
Perhaps the most common financial advice given to new investors is that when you set out, you need to have a goal. You must know what your destination is to make the right decisions about getting there.
It’s pretty sound advice. But it may also be the wrong kind of advice for many people. Talking about financial goals suggests having measurable figures that signal success or failure. They’re a target in rands and cents. However, Allan Gray’s Thandi Ngwane believes this doesn’t resonate with many people. “I spend a lot of time speaking to individuals who are new to investing and a key message to them is to pick a unit trust that aligns with their goals and time frames. But quite often this acts as a barrier, as many people don’t think of their finances from a goal-oriented perspective.”
What are your intentions?
She believes a much better motivator is to have tangible intentions. What will investing money actually do for you?
“Ultimately, people are looking for peace of mind or happiness, and that is a far stronger motive for putting money away. We need to encourage investors to think of what they value and help them understand how investing can aid them to achieve that end.”
This message might resonate particularly strongly with the current generation of savers. Sanlam recently highlighted its concerns about millennials’ low level of retirement provision. According to Sanlam Employee Benefits’ Viresh Maharah: “Millennials do not relate cognitively [or] emotionally with retirement because of the negative associations, and therefore they don’t engage with the process.”
Ngwane adds: “In speaking about retirement, millennials often aren’t thinking in terms of financial goals. But if you position it differently, from an intent perspective, whether that is a shortened working life, happiness or flexibility to do what they want to do with their time, that’s often more of motivator.”
A plan without goals?
Where does this leave financial planners? “The conversation does need to shift to dealing more holistically with clients and not just material goals,” Ngwane says. “In other parts of the world, such as the US and Australia, we’ve seen an increased shift towards behavioural coaching by financial advisors. The approach then is not so much about the hard facts around returns and so on, but about understanding the whole person and how their finances relate to their personal journeys.”
Similarly, advisors are expected to discuss asset allocation, volatility and benchmarks, but for most people these are abstract concepts. What matters is if they’ll have what they need to live the life they want to live. “If you rather consider what your personal objectives are, what the intentions are that drive those outcomes, that’s more productive,” says Ngwane.