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How Advisers Can Create Financial Plans That Reflect What Investors Really Want

Sidestepping the limitations of goals-based planning.

By Samantha Lamas, Senior Behavioural Researcher

An investor’s goals are essential for any adviser to know, so they can create an appropriate financial plan. The problem is that many investors don’t truly know their own goals. And even if they do, their goals can change as their lives change. These are some of the limitations of goals-based planning, despite its importance and positive impact.

Even so, it’s clear that when done right, goals-based investing can be a win-win scenario for clients: They can reach their goals and avoid behavioural pitfalls in the process.

In our latest research, we explore whether providing a positive psychology framework could elicit deeper goals from investors. Instead of throwing in the towel, advisers must help clients uncover their true financial goals, which involves moving past top-of-mind and surface-level goals. Moreover, advisers need to account for some wiggle room in a person’s financial plan to prepare for changing circumstances.

How can advisers create financial plans that speak to what investors really want and also maintain a level of flexibility? This is where the concept of positive psychology comes in.

How You Can Find the Goals That Truly Make Investors Happy

Positive psychology is, in brief, the study of what facets of life contribute to happiness, fulfillment, and meaningful experiences. Adopting principles and techniques from positive psychology into financial planning highlights that our specific financial goals aren’t necessarily about the goal itself but about how the goal is going to make us happy.

In other words, there are different levels of goals: surface goals and deeper goals.

Surface goals are the typical goals that investors strive for and that advisers are used to managing: saving for retirementa child’s education fund, or buying a second home.

Deeper goals are the motivations that drive surface goals. These goals are more akin to life goals or values and are related to an investor’s personal requirements for living a fulfilling and meaningful life.

Both levels are important in financial planning, even though surface-level goals are more widely recognized.

Deeper goals provide two key benefits: They help investors connect their financial goals to the bigger picture and they leave room for change. Connecting a person’s surface goals to their deeper goals helps weed out irrelevant goals and uncover opportunities. Once the two levels of goals are connected, it can be easy to see which surface goals aren’t contributing to a person’s life happiness.

An investor’s deeper goals can serve as a constant North Star, even when they go through unexpected life changes: a job loss, receiving an inheritance, or divorce. A deeper goal gives investors a more concrete idea of what they should be aiming for with their finances. The means of how to get there may need to adapt, but the deeper goal remains the same.

For example, consider an investor who wants to buy a beach house. That’s their surface goal. After a bit of conversation, say you uncover that the investor wants the beach house so they can have a go-to place for the family to gather—which means their deeper goal is really to have more time with their family. With this deeper goal in mind, more possibilities open. Maybe they can achieve this same goal in other ways, such as buying a more affordable lake house.

Or, say a client’s surface goal is to retire early. Upon further digging, you uncover that what they really want is to have more time to spend on their passion of volunteering for charity. Given this information, again, more possibilities open. Maybe instead of retiring early, your client can work part-time instead, which still offers them more free time (and happiness)—and they can have it now, instead of waiting 15 years.

How to Use the Positive Psychology Framework With Your Clients

It’s not easy to guide clients through the discovery process of uncovering both their surface and deeper goals. Luckily, advisers can lean on ready-made tools and frameworks to help clients identify both levels of goals. Based on our research, advisers can better discuss goals by working through them systematically:

  1. Start by helping clients uncover their surface goals. Past research suggests that many investors rely on top-of-mind goals during discussions and may need help getting to their true surface goals. We created a three-step exercise to help investors through this process.
  2. Now, it’s time to get to an investor’s deeper goals. For this step, we refer to the PERMA-V framework—a positive psychology framework that states well-being is composed of the following components: positive emotion, engagement, relationships, meaning, accomplishment, and vitality. In our research, we asked investors to consider each of these components and add any more goals that come to mind after going through a goal-setting exercise. Our findings suggest that using a positive psychology framework like PERMA-V may help give advisers insights into a person’s life values—the things that are at the core of their well-being and what makes them happy.

Our research finds that this approach is helpful for ensuring that investors aren’t just relying on their biases or thinking about their most pressing concerns when talking about goals. Moreover, using a positive psychology framework, such as PERMA-V, can guide people through the process of unpacking their motivations.

By first prompting investors with a checklist and then deepening the conversation with a meaningful framework, advisers can explore the specifics of what a client wants as well as the broader drivers underlying their desires. Such conversations can prepare advisers not just to get clients to where they want to go but also to help them be open to alternatives that may also suit their needs.

For this project, Morningstar worked with an unaffiliated wealth management firm, PWL Capital.

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

Crypto, REITs, Private Equity: Long-Term Investments or Short-Term Trends?

By Samantha Lamas, Senior Behavioural Researcher

Investing trends are hard to ignore. Every swipe on your phone seems to boast a new (or reoccurring) investing opportunity that you must jump on—whether it’s a new crypto product or exposure to private equity.

The source may even provide valid-sounding reasons as to why the opportunity is a good idea. However, before you jump on the bandwagon, it’s worthwhile to consider if this opportunity is right for you, regardless of the overall benefits touted online.

Taking a step back before making the plunge can help you do two things in particular: make sure you’re not deceiving yourself and make sure your actions are in line with your financial goals.

Why Are Investors Drawn to New Investment Trends?

In our recent research, we asked individual investors about their knowledge of certain trending investments, whether they owned them, whether they were planning on changing their investment in each, and their motivations behind that decision. We focused on the following trends:

This is, of course, not an exhaustive or perfect list of all assets that could be considered “trending investments,” but it covers the main assets that we identified from conversations with industry leaders and reviews of industry research and content.

We found that most investors only had a basic understanding of these investing trends. For most of the assets, fewer than half of investors felt they could even pick out the correct definition from a list.

When we looked at people’s motivations for making changes to their future investments in each asset, the most common reasons people gave had to do with returns, their confidence in the long-term viability of the asset, macroeconomic factors they thought could affect the asset, and their desire to time the market.

Notice how most of these reasons are related to short-term thinking, trying to time the market, overemphasis on present-day returns, and overreaction to events—common mistakes investors have always made.

Furthermore, many of the benefits commonly attributed to these investing trends—things like diversification, tax efficiencies, or transparency of information—aren’t at the forefront of investors’ minds. In other words, when it comes to decisions about trending investments, it’s all too easy to fall into age-old investing pitfalls.

Follow These 3 Steps Before Jumping Into Investing Trends

To avoid making an impromptu investment decision, it’s helpful to have a set process you can use to slow down, combat cognitive biases, and think carefully through future investments.

To that end, we created a three-step process inspired by our research. The process guides investors through recognizing their knowledge level regarding the investment topic in question, addressing their motivations and connecting those back to their financial goals, and then widening their perspectives:

1. Level-set: Use the following scale to understand how knowledgeable you are about the investment topic. If you rate yourself as 3 or below, hold off on making any decisions until you more fully understand the investment. Regardless of where you are on the scale, consider visiting a few trusted sources for more information about the investment.

Knowledge Level

2. State your motivations and align with your investing goals: Take a moment to state your motivations for making this investment decision. Consider choosing from the following motivations we found in our research. Carefully consider what is driving you to make this change to your investments. Next, consider if this motivation aligns with your financial goals. Fill in the corresponding area in column two with your explanation of how this gets you closer to your long-term goals.

Motivation

3. Deliberately broaden your perspective: Because of the way our minds work, this is harder than it seems. Set aside an hour and intentionally search online for three resources that disagree with your investment decision. For example, if you are looking to buy a particular REIT, read three resources that claim this is a bad idea. Finding and considering perspectives different from your own will help you reduce confirmation bias and garner a more well-rounded view.

 

 

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

From Cost to Value – Transforming How You Think About Advice Software

If you’re looking for a return on investment that goes beyond just cost considerations, upgrading your tech can be the ideal place to start. 
 
By Ken Ong, Associate Director of Product
 
Coming out of the year-end break, it’s easy to get overwhelmed by the demands of a new year. From onboarding new clients to battling with dated systems that haven’t evolved with your practice, there are several concerns competing for the top of the to-do list. But advice software doesn’t have to be one of them – especially when your technology stack can save you dollars while saving you time. If you’re looking for a return on investment that goes beyond just cost considerations, upgrading your tech can be the ideal place to start. 
 
1. Shifting Perspective: Software as an Investment Decision
In the quest for cost-effectiveness, financial advisers often undervalue the intrinsic value of software as an investment. Rather than viewing it solely through the lens of expenditure, consider it an essential tool that contributes to your business’ growth. The key question to ask is, “Are you reaping sufficient returns from the system based on what you are paying for it?”
 
2. Calculating Return in Software: Time Saved
Traditionally, the return on investment is measured in dollar terms, but in the realm of financial planning software, the currency is time. Efficient advice software should translate into time saved. Evaluate the hours saved per month and assess their financial equivalent. For instance, if you save 3 hours a month using a particular software and your professional charge rate is $300 per hour, then the monthly value saved is $900.
 
3. Assessing Cost Justification: A Practical Example
Let’s delve into a practical example to illuminate the concept. Suppose you’re using Morningstar AdviserLogic software and saving 3 hours monthly, equating to a value of $900. If the software costs less than $1200 per month, the investment is justifiable. However, if the cost surpasses the value saved, it’s time to consider alternative solutions.
 
4. Beyond the Bottom Line: Additional Benefits
While cost is a crucial factor, it’s vital to look beyond the bottom line. Consider the holistic benefits that the software offers. Does it enhance client interactions, streamline reporting, or provide insightful research and data analytics? These additional advantages contribute significantly to the overall return on investment.
 
5. Adapting to Changing Needs: When to Reassess Your Software
The financial advising landscape is dynamic, and so are your business needs. Regularly reassess your software to ensure it aligns with your evolving requirements. If your current system falls short in delivering maximum efficiency and value, it may be time to explore alternative solutions.
 
6. Making the Change: A Thoughtful Approach
Changing software systems is a significant decision. Before making the switch, conduct a thorough evaluation of potential alternatives. Consider factors such as features, user-friendliness, and scalability. Additionally, seek input from team members to ensure a seamless transition and minimal disruptions to daily operations.
In the pursuit of cost-effectiveness, financial advisers must adopt a strategic mindset, treating software as a valuable investment rather than a mere expense. By assessing the time saved and ensuring it surpasses the associated costs, advisers can make informed decisions that not only enhance efficiency but also contribute to long-term business success. Regularly reassessing software solutions ensures alignment with evolving business needs, guaranteeing that the tools in place continue to deliver the maximum value.
 
Ken Ong is Associate Director of Product – Financial Planning at Morningstar Australasia Pty Ltd.
 
 
 
 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

Adviser-to-client template: 2024 Opportunities

For financial advisers to use with clients. This document is intended to support your service proposition to clients. It is produced by our investment writers with a deliberately light tone and structure. However, these are guidance paragraphs only. It is not guaranteed to meet the expectations of regulators or your internal compliance requirements. If you wish to remove or amend any wording, you are free to do so. However, please bear in mind that you are ultimately responsible for the accuracy and relevance of your communications to clients.

 

 

Dear Client,

As we settle into 2024, I wanted to proactively reach out to you by delving into key trends, potential opportunities and risk factors that are shaping your financial progress.

If you have any questions about the below, or require any financial planning assistance, please don’t hesitate to contact us and we’ll arrange a time to meet.

Key Trends

Investors will likely be happy as they review their statements in early 2024. Nearly all traditional asset classes have generated positive returns in recent memory, boosted by performance across equities and bonds. This obviously follows a tough year in 2022 for most investors, so we feel good about the market direction and what is ahead.

The strength has largely been driven by the expectation central banks will cut interest rates in 2024 as the worst of the inflation spike is now considered behind us. Several equity markets now sit at or near all-time highs. Bonds have had a harder time but have also seen a recent uptick prices as yields fell in Q4 2023. This is a feature, not a bug, of investing – we want different assets that can perform well at various stages of your journey.

Let’s not forget that investors went into 2023 worried about inflation and expecting a recession by the second half of the year. This never transpired. Now in 2024, investors are expecting low inflation, no recession, and significant interest rate cuts.

Potential Opportunities

At present, we remain cautiously optimistic. Our approach in this environment is to balance risk and opportunity, with some asset classes looking attractive to us at the current time.

To that end, we are informed by the views of Morningstar, among others, and see positives in this environment. Morningstar sees opportunities to add value in fixed income and select equity markets, which are expressed in your portfolio. A brief list of the convictions include:

  • A broad allocation to equities, although parts of the US market are expensive by historical standards.
  • A small allocation to emerging markets, despite the risks China equities look attractive.
  • Government bonds where higher yields can provide diversification benefits again.

We feel good about your portfolio and its ability to capture the opportunities that exist. This is especially true given the potential interest rate cuts ahead, where we could find ourselves with a tailwind to our back.

Risk Factors

On the risk side, it is likely to be a busy year with elections in the US, UK, India, and others. Geopolitical tensions are also quite high, so we should expect bouts of uncertainty. In times like these, it is essential we remind investors that the presence of uncertainty does not imply a scarcity of opportunities.

As Warren Buffett famously said, “Risk comes from not knowing what you are doing”. In this respect, we want to emphasise the importance of focusing on good investing principles and dealing with the conditions we are faced with. We will continue to control everything we can, while managing those factors we cannot control via principles such as diversification.

Overall, we feel well placed to advance your financial journey over 2024 and believe your portfolio is well positioned for this environment. Markets have been reasonably kind to us lately and we continue to look ahead with positive intent.

Should you have any questions or require further clarification on any aspect of your financial plan, please do not hesitate to reach out.

Kind regards,

Adviser

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

2 Ways to Build Strong Client Relationships

Don’t wait until a financial crisis to shore up your client relationship.

 

As behavioural researchers, we often get asked questions like:

  • How can I prompt clients to refer me to others?
  • How can I prevent lost returns or market volatility from affecting my client relationships?
  • How can I convince my client to follow my advice?

Although each of these questions has its own nuances, at their core, they have one thing in common: They pertain to building a strong relationship with clients.

Once an advisor has a strong relationship with their clients, many of these problems seem to resolve themselves. Even for those that require a bit more coaxing, the solid foundation of a strong client relationship will make ongoing interventions much more successful.

The problem in modern-day financial advising is that many advisors wait until a financial crisis to dedicate time to their client relationships—only then do many advisors play the role of financial counselor or coach by helping clients manage their emotions. At this point, it might be too late. Research shows that lost returns are among the top reasons advisors get fired. Also, research has found that satisfaction with advisors followed market fluctuations.

In other words, you have to do the work to build a strong client relationship before a crisis. Unless you’ve done that prep work, when markets go awry, your client relationships may already be suffering.

What Behavioural Finance Insights Can Teach Us About Client Relationships

So, how do you build stronger client relationships? To start, let’s consider what breaks them.

In our research, we asked investors who had cut ties with an advisor in the past why they fired their financial advisor. The exhibit below shows the top six reasons why investors fired their financial advisor, and the percentage of responses that pertained to each category.

Once we dug into each of these categories, we uncovered two key areas advisors can focus on to prevent these issues from popping up in their practice, and to mend or build strong relationships in the process.

How to Build Stronger Client Relationships

Based on our research, there are two powerful areas advisors can improve on to strengthen relationships: building understanding and building trust. Below, we provide research-backed insights advisors can use to improve both.

Building Understanding

To understand an investor, advisors must begin by helping the investor understand themselves. To an extent, advisors must help investors discover their own needs and goals.

To better understand a client, advisors must ask good questions and then listen. This sounds simple, but it isn’t.

  • Start with an icebreaker question—there are loads of promising ones out there. Regardless of which one you use, pay attention to how this question affects your client’s mindset. Small tweaks in wording can make a difference in how they think about their financial goals.
  • Remember that the client should be talking most of the time. If it takes a moment for them to answer a question, that’s OK. Don’t jump in to fill the silence—let the client fill it themselves.

Sometimes it’s hard to help a client dig deeper during discussions, but it’s essential to really getting to know a client.

  • Don’t be afraid to lean on ready-made checklists, exercises, or tools to guide discussions.
  • Repeat this process regularly. Many advisors only do this during onboarding but, as clients change, their needs change.

Building Trust

Trust is about vulnerability, and for an individual to feel comfortable with vulnerability, they need to believe in the intentions and behavior of the other party. To develop trust with a client, start by putting those intentions and behaviors on display. This is still about building understanding—but now, it’s about helping the investor understand you.

Building trust starts with open and honest communication that makes the financial planning process clear and accessible to clients.

  • Help your clients understand the services you provide and how they can be used in their personal situations.
  • Be proactive about reaching out to clients. Remember, out of sight is out of mind. While you’re at it, try using different communication channels to meet clients where they are.
  • Keep clients updated on both the actions you take with their account and what market insights mean for them.

In our research, investors consistently cite an advisor acting in their best interest as a top source of trust. Unfortunately, many clients may not have a good idea of what the term “best interest” means.

Discuss your commitment to the best interest standard by defining what it means for your relationship with the client and their money. A few possible topics to address:

  • How do you get paid?
  • What happens if the client accepts your recommendation?
  • Show a breakdown of any costs/fees.
  • Detail how often you will be monitoring their investments.
  • State how often you will be meeting with the client.

 

 

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

Don’t Let Communication Errors With Clients Become Dealbreakers

Learn how to prevent the little mistakes from adding up.

 

Issues in communication can often be seen as inconsequential, which is reflected in how we talk about them—”verbal flubs,” “slip-ups,” “lapses in communication,” and so on. But these little turns of phrases belie the reality that miscommunication can be costly.

In a recent study, we found that numerous faux pas that financial advisors may view as minor actually damage their relationship with their clients, and many of these mistakes were rooted in miscommunication. There were issues related to how things were communicated (like how fees were broken down), and there were issues related to what was communicated (like how long it would take an advisor to complete a task).

Miscommunication is common and impossible to eradicate altogether, but understanding it allows advisors to better prevent and resolve these issues when they happen, helping mitigate the amount of damage done.

You will miscommunicate with clients.

Miscommunication is inevitable because language itself is ambiguous. If I told you, “I emailed the woman with an idea for a project,” you might interpret it as: 1) I sent this woman an idea I had for a project, or 2) I reached out to a woman who had an idea for a project. There is more than one valid way to interpret this sentence.

This issue with communication is compounded by the foibles inherent to the human mind. For one, we tend to think egocentrically when we talk. That is, our default is to treat our personal, private knowledge as common ground with the person we’re talking to, even when it’s not. This is especially troublesome for professionals, so much so that it is considered a “curse” (the curse of knowledge). When we know something, it’s hard to imagine not knowing it. This issue is further exacerbated by our tendency toward overconfidence. We often talk about overconfidence in decision-making, but people likewise think they have communicated their point to others better than they actually have.

We can see both behavioral biases come into play when we look at those faux pas. When telling a client the next steps you are going to take with their investments, you may fail to communicate an expected timeline with them because you know the estimate but fail to consider they might not have a frame of reference. Furthermore, you may think you have successfully communicated with clients about how your fees break down because you touched on it in a meeting but fail to see how this breakdown was unclear to the client.

What can you do about it?

Now, I’ve given you the bad news about miscommunication being both costly and inevitable, but I will not leave you hanging on tips for dealing with it.

1. Practice clear and concise communication.

For our purposes here, practice makes automatic. We are more likely to make those egocentric communication mistakes when our brains are working harder. This is because, when taxed, our brains turn to automatic ways of thinking to help complete tasks. Since multiple things can be taxing your brain on a given day, you should make clear and concise language your default for explaining important and complex topics—from how fees work and the best interest standard to the different investment vehicles and which ones are (or aren’t) right for your client.

First, take the time to nail down your messaging. You need to strike the balance between relying on industry jargon and knowledge and being too patronizing. Start by writing out an explanation for a topic and then read it over; ask yourself if there is background knowledge that a well-respected friend who isn’t in finance would need in order to understand you. If so, add it in. When sufficiently revised, practice these explanations with yourself, your colleagues, or your dog until they are second nature.

2. Create frameworks of written communication that you can deploy with your clients.

Sharing information with clients in a way to ensure they extract the important information is not easy. Advisors often have to convey a lot of information to clients, but done improperly, this can lead to information overload (where the amount of information breaches our capacity to process it). However, creating and deploying standard frameworks for written communications can help by scaffolding how that information is processed by your clients.

For example, you can set a standard for client emails that subject lines must all contain the same information (such as the purpose of the email and whether action is required by the client). For longer emails, you can also include a key summary section that includes things like next steps and expected timelines. How you standardize your communication can be specific to your practice and clients, but setting up guidelines for doing so can help ensure you’re providing clear information to clients and that they know how to find it.

3. Follow up with clients to check on comprehension.

This is not a test for your clients; it’s a test for you. Following up with clients will help you determine if you need to communicate better. One way you can do so is by sending clients a postmeeting survey, checking to see whether there was miscommunication. We have developed one based on the most common faux pas financial advisors make, but you might want to develop your own.

It’s important here to not just send out this survey and wash your hands of it. Instead, you must follow up with clients and clarify any miscommunication that happened. This practice gives you the twin benefits of mitigating damage that miscommunication may have done to a particular relationship and of helping you identify your communication weak points.

 

 

 

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

Adviser-to-client template: 2024 Outlook

For financial advisers to use with clients. This document is intended to support your service proposition to clients. It is produced by our investment writers with a deliberately light tone and structure. However, these are guidance paragraphs only. It is not guaranteed to meet the expectations of regulators or your internal compliance requirements. If you wish to remove or amend any wording, you are free to do so. However, please bear in mind that you are ultimately responsible for the accuracy and relevance of your communications to clients.

Dear client,

As we near the end of 2023, I want to provide you with some guidance on how we are thinking about the investment landscape for 2024. Of course, if you have any questions relating to this, please do reach out to discuss. We otherwise wish you a great lead-up to the festive season and look forward to connecting in due course.

Investing Outlook for 2024

It is helpful to look back over 2023 and acknowledge it has been a delicate year for investors. Yet, we’ve been relatively pleased with how we’ve navigated such an environment given the pace of change and the major increase in interest rates.

In some respects, this sets us up for a more positive investment outlook for 2024, with a much better starting position for money invested today due to the higher rates. Yet, our overall approach for 2024 will be a blend of continued caution and optimism. We understand market volatility can be daunting, but it’s important to remember that periods of market volatility and pessimism are a normal part of the journey to reach financial goals. Moreover, pessimism often creates some of the better investing opportunities. With this in mind, we see a blend of fixed income and selected equity markets playing a role, which you currently hold.

Risks and Opportunities Ahead                                                                         

Part of the reason for the balance between caution and optimism is that anything can happen in a given month or year. This is especially relevant in a fast-changing inflation setting.

To manage this scenario, we 1) emphasise risk management, and 2) take a long-term perspective to create value in your financial plan. Prudent investors who stay the course and focus on matching their portfolio objectives to their goals can create long-term value. These are core principles we apply consistently and we believe will continue to serve you well in 2024.

If you’d like a detailed view of what might lie ahead, the Morningstar 2024 Outlook is fresh off the press and worthwhile reading. We’ve summarised the key takeaways below:

  1. Economic backdrop – the outlook includes a slow economy, lower inflation and eventually lower interest rates. This is supportive of classic multi-asset portfolios investing in bonds and equities.
  2. New risks, including the wars and upcoming election – the collection of concerns is daunting, but it’s worth remembering that not every risk requires a whole new portfolio to survive its realisation. A well-calibrated portfolio should weather most external shocks fairly well.
  3. Opportunities and risks of artificial intelligence – as companies of all shapes and sizes try to take advantage, we could see profit margin expansion, but it carries risk too. The principles of good investing still apply.
  4. Taking advantage of higher interest rates – the transformation in the income landscape is meaningful, with certain asset classes gaining in attraction. Bonds in particular have become more attractive as interest rates have increased.

All of these points relate to your portfolio nicely. While risks need to be managed, there are clear opportunities for gain. By staying informed, maintaining a diversified portfolio, and focusing on the principles of good financial planning, we can navigate the changing investment landscape and make meaningful progress towards your goals.

Again, if you have any questions or would like to discuss your portfolio in more detail, please don’t hesitate to reach out. We are here to help.

Regards,

Adviser

 

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

7 Faux Pas for Financial Advisers To Avoid

Time and again, research shows the personal relationship between a client and their adviser is paramount to both parties’ success. Without a strong personal relationship, advisors cannot provide the customized, high-quality level of advice that clients are looking for nowadays. Because of this, clients may disengage with their advisor or outright fire them if they experience a lack of personal relationship along with lackluster advice.

In our latest research, we investigated which adviser behaviours contribute to investor disengagement. Moreover, we dove into how investor disengagement presents itself in the adviser-client relationship.

Death by a Thousand Cuts

We started our research by collecting common adviser behaviours. We then asked adviser clients to rate how frequently they experienced each behaviour. For those they reported experiencing, we asked participants to rate their emotional response to the behaviour (on a scale from “I really disliked it” to “I really liked it,” with a neutral midpoint). We then asked participants how each behaviour affected their relationship with their adviser across four dimensions: their trust in their adviser, their decision to collaborate with their adviser, their decision to allocate assets for management, and their decision to recommend their adviser to others.

Which Common Adviser Behaviours Do Clients Dislike Most?

We found seven actions that clients reported disliking (in order from most to least disliked):

  1. Did not provide a breakdown of fees.
  2. Took more than a week for tasks.
  3. Used financial jargon.
  4. Recommended investments without considering values.
  5. Suggested investment options without going into details.
  6. Asked me to complete long forms.
  7. Did not provide holistic advice.

For the rest of the actions in the survey, clients reported either neutral or positive feelings (see paper for full results). To understand the impact of these disliked behaviours, we created a composite score of the four dimensions and then identified the relationship between the score and each disliked behaviour. We found that how much a client disliked an action had a moderate, negative impact on their relationship with their adviser. In other words, an investor experiencing a disliked behaviour was discouraged from trusting and recommending the adviser, as well as encouraged to invest less with and to stop working with the adviser.

Faux Pas No More: Being Conscious of Disliked Behaviours

Some of the adviser behaviours we investigated in our research may seem harmless on the surface but can lead to disastrous wounds over time. It’s all too easy to wave off these results, with the claim that you (as a financial adviser) don’t do these things to your clients. Other advisers use financial jargon that leave clients confused or speed past investment explanations. Not you, of course. Unfortunately, we find more than half of the clients experienced each of these behaviours with their own advisers—making these behaviours a lot more common than any adviser should be comfortable with.

To help advisers make sure they aren’t one of the culprits, we created a two-step takeaway that’s accessible in the full white paper. The first step is a checklist that advisers can use before and during a conversation with a client, so they can reflect and address the top five disliked behaviours we found in our research. Step two is a follow-up survey template that advisers can send to clients after a meeting. The survey subtlety asks the client if they experienced any of the top five disliked behaviours during their meeting with their adviser. Compared with being face-to-face, the online format of the survey may encourage honest feedback; instead of being put on the spot, clients have time to reflect on the meeting and provide comprehensive feedback.

Together, this two-step takeaway can help advisers ensure they are not accidentally tearing down the relationships they meant to develop.

 

 

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

Why It’s Important to Retire With Purpose

By Samantha Lamas, Senior Behavioural Researcher

 

For those who have saved a healthy nest egg, retirement is a dream destination, one where you have loads of free time and zero responsibility. Gone are the days of the 9-5 toil and traffic-riddled commutes. Once you retire, what you do with your day is completely up to you—you have the control. However, while breaking free from routines and having endless choices may sound great on the surface, it can be paralyzing if an investor approaches retirement without a plan.

Some research points to the existence of “retirement risk,” where retiring can boost the risk for heart disease and other medical conditions by 40%. Retirement was also ranked as one of life’s most stressful events. However, experts believe that the dangers of retirement can be mitigated by things like a strong sense of purpose and social connections. In other words: Making sure your finances are in order is just step 1 of preparing to retire, then it’s about making sure your goals and plans for retirement are aligned with your life purpose.

Where do life values fit in financial planning?

Identifying your life purpose may seem like an exercise in guesswork when it comes to financial planning, but there is value in aligning your financial decisions with what you deem important in life. Whether you call it your life purpose, life goals, or life values, these are the things that are your personal requirements to living a fulfilling and meaningful life.

Explained this way, it’s hard to justify not incorporating your life values into your financial plan. There is no logic in spending your money on things that do not make you happy. This concept also extends to retirement—there is no logic in spending your time, money, and resources on things that do not make you happy once you retire. Unfortunately, we don’t often take the time to consider what makes us happy. We bulldoze through goal-setting exercises, and list goals that are top of mind, but miss goals that are truly important to us. Then, we don’t go back and connect those goals to our life values.

For example, let’s go back to the “dream” of retirement. For some, this dream may consist of unlimited free time to play golf. I would argue that this plan is incomplete and not very well thought through. Realistically, golf may only take up a couple of hours per day, so what will this retiree do with the rest of their day? Also, playing golf every day may get tiring. What happens if they get bored? Injured? Need to relocate to a place without a golf course nearby? Poking holes in this retirement “dream” is all too easy and shows how the existing process for retirement life planning leaves many people with unmotivating and unsatisfying goals that can leave them directionless in retirement.

What is your life purpose?

Fortunately, we are not chained to the status quo.

In our recent research, we tested a process to help individuals uncover their life values in the context of their financial goals. The process depends on an existing framework from the field of positive psychology that posits that well-being is composed of several components: positive emotion, engagement, relationships, meaning, accomplishment, and vitality, also known as PERMA-V. We found that asking individuals to consider the PERMA-V framework within the goal-setting process helped them identify goals that were closer to their life values.

PERMA + V

Description of PERMA + V Framework

Based on our research, to make sure your financial goals and retirement plans are aligned with what makes you happy, consider the following process:

  1. First, identify your financial goals. This is harder than it seems, and we suggest using an exercise to help you work past top-of-mind goals.
  2. Consider the PERMA-V framework. After carefully thinking about each of these categories, write down any additional goals that come to mind.
  3. Now it’s time to ask yourself some hard questions. Take a look at your Step 2 goals. These goals may start to look like your life values. With these values in mind, consider your financial goals. Are all of your financial goals working toward achieving your life values? Are any life values unaccounted for? How can you continue working toward those life values in retirement?

As an example, let’s go back to the retiree who wants to play more golf in retirement. Playing golf can be considered a financial goal because it requires some degree of financial stability (membership fees, equipment costs, and an absence of employment income). Upon further digging, this retiree may realize that playing golf is actually related to their life values of vitality (pushing themselves to improve their skills and stay healthy) and maintaining meaningful relationships (meeting up with friends and loved ones on the golf course). With these values in mind, more opportunities open for this retiree. If golfing every day doesn’t work out, their life values can also be satisfied by going on daily walks with their children, volunteering at an animal shelter to give dogs in need their daily walks, or joining a local running club. By connecting their values to their financial goals and retirement plans, this retiree can align their activities to their life purpose, hopefully leading them to a fulfilling and meaningful life.

Going through an exercise like this can help you identify areas where your spending, saving goals, and financial plans aren’t aligned with your life values. As a result, it can help you redirect before you waste too much precious time. Keeping these values in mind can also provide a constant North Star, one that doesn’t change once you go through a dramatic life event like retirement. Knowing what makes you happy and what you value most in life can help keep you on track, even when you are confronted with the time, flexibility, and freedom that retirement provides.

 

 

 

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

 

How to Make Your Clients Happier

By Danielle Labotka, Behavioural Scientist

 

When it comes to financial advising, it may seem like the best way to make your clients happy is with the Midas touch. After all, who doesn’t want their investments to turn into proverbial gold?

But King Midas wasn’t happy with his gift, and maximizing your clients’ wealth may not be enough on its own to make them happy, either.

Looking at Maslow’s hierarchy of needs, it is easy to see how money can be directly converted into the needs at the base of the pyramid—physiological needs (like food and shelter) and safety needs (like security of resources). However, money does not so readily convert itself into the higher needs like belonging, self-esteem, and self-actualization. Instead, clients may need guidance from their advisor to see how their wealth can support their long-term happiness and life satisfaction, which may be facilitated through insights from positive psychology.

What is positive psychology?

Positive psychology is the study of what makes a life worth living, and the field is interested in understanding how factors like resilience, strength, and growth can help people flourish. Though there are many ways to apply positive psychology, one of its most promising uses in financial planning lies in helping clients define and pursue meaningful goals.

In goal planning, insights from positive psychology may help clients unpack life goals (like having a meaningful connection with family) that drive their desire for more tangible goals (like buying a vacation home for family trips). In positive psychology, the PERMA framework outlines components that contribute to well-being: positive emotion, engagement, relationships, meaning, and accomplishment. Recent research from Morningstar found providing such a framework during the goal-setting process helped people shift their focus from tangible goals to life goals. In turn, these life goals can help advisors build meaningful and flexible financial plans that help clients be where they want to be.

Positive psychology may be helpful in getting clients to pursue those goals, too, by orienting them toward their strengths. For example, in one study, people were asked to list their personal strengths and how those strengths can help them achieve financial security in retirement. Compared with those who didn’t do this strengths-based exercise, people who did felt more capable in preparing for retirement, had greater clarity in their retirement goals, and had taken more steps to prepare for retirement three months out. As such, clients may be further empowered to work toward their financial goals when they can see how their strengths can contribute to attaining their goals.

There is an important caveat about positive psychology for financial advisors to note. Namely, positive psychology does not mean shunning your clients’ negative emotions (like panic during a market downturn). Not only are those negative emotions very real to your clients, but they can also affect how they act for better and for worse. Keep in mind that positive psychology may serve you well in some interactions with clients (like goal setting) but not all of them.

How can I incorporate positive psychology into my practice?

Though positive psychology is not a panacea for all that ails your clients, using positive psychology can help clients understand and pursue their goals and, in turn, feel more satisfied with their life (and with you!). Here are some tangible steps for using positive psychology in your practice:

  1. Bring positive psychology into goal-setting discussions with clients. Understanding clients’ tangible goals and life goals is vital to financial planning. To that end, we have designed a process for goal-setting; the process first incorporates a framework to help clients identify their tangible goals and then incorporates the PERMA framework to help clients identify their life goals. At the end of the process, you will have a better understanding of what your clients want to achieve with their money and why those goals will make them happier.
  2. Help clients identify how their strengths can help them reach their financial goals. Clients may be more likely to pursue their financial goals if they see how their strengths can help them do so. Take time to help clients identify their strengths by using tools such as the VIA Survey. Then, have a conversation about how those strengths can contribute to their goals. For example, a client whose strength is humor might be able to use that humor to shake off stress during rocky markets, which helps them achieve their goals because they didn’t sell off investments in a panic. This is a place where you can help clients make connections between their strengths and realize their goals they could not make on their own.
  3. Continue your education on positive psychology. We have only covered a sliver of positive psychology in this article, so continuing your own education may help you find other places to incorporate positive psychology into your practice. Consult sources from researchers in the field and experts in financial planning to expand your knowledge base over time.

In the end, clients aren’t just looking for you to turn everything into gold; they are also coming to you for emotional support. Positive psychology may help you better address these emotional needs clients have and, in the end, make you both happier.

 

 

 

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

 

Investment Insights: Bond yields and the Mideast conflict

Bonds are a core part of most investor toolkits. They come in different shapes and sizes, but have historically offered two strong propositions:

  • Safer bonds, such as Australia and US Government bonds, can act as a ballast against stock market volatility, balancing the risk/return pendulum.
  • Bonds usually offer positive returns above inflation, typically beating cash over the long run.

This is not the recent experience. With the sudden rise in interest rates and surprisingly strong employment numbers, we’ve seen a big move up in global bond yields. This has left many investors with bond allocations in the red again for 2023, following declines in 2022.

The narrative gets more confused in the wake of the attack on Israel and Israel’s response. It’s not unthinkable that an adviser or client may wonder whether we can still count on Government bonds as a safe haven in times of geopolitical crisis. (By “safe haven” we mean that in particular U.S. Government bonds are one of the few asset classes investors turn to broad market selloffs.)

So, do bonds still deserve a place in a portfolio? Should investors maintain their long-standing rationale for mixing bonds and stocks together? And what can we expect from bonds, given the tragic developments in the Middle East? While it may be difficult to swallow, there are reasons for optimism for the future of fixed-income returns.

Are bonds a safe haven in the midst of the recent conflict in the Middle East?

Given the sudden and continuing tragic situation in Israel and Gaza, let’s tackle the “safe haven” status first. In recent months, the safe haven status of U.S. Government bonds has been a topic of debate. With concerns about the U.S. government’s huge deficits and the Fed’s higher-for-longer narrative (which could mean the U.S. needs to pay more to cover its debt payments) some have speculated on whether U.S. Government bonds’ safe haven status is intact.

We believe it depends on the risk in question. If equities or credit decline because of concerns surrounding interest rates, then Government bonds may not provide the ballast investors would like. That’s indeed what we saw in 2022.

However, in the case of geopolitical conflict, the focus is on risk aversion generally. In this case, relative safety in an unstable world matters most, so we expect Government bonds to act as a store of value, particularly in the U.S. but also in highly rated countries like Australia.

The trouble comes from the confluence of events, as these geopolitical risks occur at the same time as rate rises. In those instances, our preference is for the shorter end of the yield curve. This generally means Government bonds with a maturity date of less than five years, which have yields in excess of 5%, in the U.S. with the backing of the U.S. government and limited interest rate risk.

Do we still think bonds are a good investment? 

Looking forward, our outlook for fixed-income returns remains optimistic. Yields are resetting at higher levels, while prices are declining, creating attractive opportunities in fixed income from a valuation perspective.

Particularly, areas like short-term Government bonds, boasting yields of 5% or higher in the U.S., present an opportunity for investors to bolster their portfolios with substantial income without exposing themselves to excessive duration risk (a measure of interest rate risk).

Conversely, in the U.S. the longer-term debt market faces persistent pressure due to expectations of prolonged Federal Reserve policy and the enduring strength of the economy. With the sell-off in long-term global Government bonds, we are cautiously optimistic about the better prospects for higher returns and income, though we still advise investors to carefully consider their overall exposure to duration.

Why are Treasury yields still rising?

Reflecting on the beginning of the year, the financial landscape and consensus projections unanimously painted an optimistic picture on inflation moderating, coupled with a pessimistic view of developed economies in the process of slowing down due to the assertive measures taken by the central banks. Subsequently, we have witnessed a rollercoaster of developments that have notably yielded a remarkably resilient U.S. economy, seemingly impervious to the policy manoeuvres of the Fed. Furthermore, certain aspects of the global economy suggest that attaining the central banks’ inflation targets may require more time than initially envisaged.

First and foremost, labour markets in Australia and the US remain the driving force behind a stronger consumer than expected, despite a significant increase in interest rates over the past 18 months. A lower-than-average supply of workers, coupled with persistent demand for goods and but particularly services, has maintained hiring at a pace that surpasses typical expectations in a rising interest rate environment. In the US, fiscal policy, characterised by increased spending and widening budget deficits, is acting as a stimulant for the economy, contrary to the Fed’s objectives in its battle against inflation.

Are central banks’ “higher for longer” messages the main catalyst?

Taken together, this backdrop has fostered the notion that interest rates will remain elevated for an extended duration. Consequently, long-term bond yields have surged significantly within just a few months, as markets brace themselves for this scenario—an outcome that was not accounted for just half a year ago. As long as the labour market retains its resilience in the face of monetary policy actions, fiscal policy remains accommodative, and overall demand remains on a steady course, the Federal Reserve and the RBA lack a compelling motive to shift away from its hawkish stance. An untimely shift toward a more accommodating position poses the risk of inflation rekindling, reminiscent of the Volcker era in the 1980s.

To reiterate, the concept of enduring higher interest rates was not factored into market forecasts earlier this year. Now, we are witnessing markets adapt to this new reality in real-time, as it becomes evident that the economies have so far been more resilient than anticipated.

Any new risks we need to think about? What are the consequences of higher rates?

As financial markets continue to absorb the implications of prolonged elevated interest rates, the practical consequences in the medium term may face challenges. In the U.S. we are witnessing the impact on the housing market, where we observe declining prices and subdued demand while in Australia the housing market has bounced back from steep losses. Furthermore, consumers who had previously been buoyed by stimulus measures during the Covid era have now depleted their surplus savings, which had been a driving force behind the remarkable demand surge in 2020 and 2021. With diminished savings and higher interest rates affecting credit cards and loans, as well as increased prices for everyday essentials, the risk of reduced consumption looms large.

If demand erosion becomes widespread, it could jeopardise the revenue and cash flows of companies across the board. This, in turn, could lead to a reversal in hiring trends or even sustained job cuts across various sectors of the economy. These same businesses are also susceptible to higher debt costs when they need to refinance or raise capital. Many of these companies have outstanding low fixed-rate debt issued during 2020 and 2021. However, if the central banks maintain their commitment to prolonged higher rates, companies will be compelled to refinance in a substantially higher interest rate environment, adding pressure to their ability to manage their debt.

What’s the likely impact on the economy?

In summary, elevated interest rates have a tightening effect on the overall economy. Some repercussions manifest suddenly, as seen in the housing market, while others have a delayed impact and take time to materialise, such as in labour markets. There is reason to believe that the RBA and Federal Reserve may stick to a higher-for-longer policy, and history suggests that recessions (hard landings) occur more frequently than smooth economic transitions (soft landings). However, predicting when or if such an event will occur remains challenging. Therefore, it is advisable to construct investment portfolios with a range of potential outcomes in mind, avoiding undue bias towards a single scenario.

Do Government bonds still offer the same diversification?

As a core holding among many investors, owning longer-term Government bonds usually offers a twofold benefit:

  • First, it mitigates the opportunity cost of remaining invested in short-term debt. In the event of a Fed policy reversal and interest rate cuts, short-term debt could experience a sharp decline in yields, forcing investors to refinance at significantly lower rates. Maintaining exposure to long-term bonds secures higher yields both today and for an extended period, thereby reducing opportunity costs.
  • Second, long-term Government bonds have historically served as effective diversifiers in the face of credit and equity risks during market downturns.
 

While we acknowledge the possibility of continued economic resilience, the potential for a conventional downturn should not be discounted. In such a scenario, long-term bond exposure could still offer a hedge against riskier segments of your investment portfolio. Nevertheless, it’s important to note that during this cycle, the diversification benefits of long-term Government bonds have been less pronounced, primarily due to a higher inflation environment. If inflation proves to be more persistent than anticipated, the traditional negative correlation between long-term Government bonds and equities may not be as robust.

Does the “inverted yield curve” mean anything in today’s context?

The current shape of the US yield curve could pose a challenge for long-term Government bonds potentially mitigating equity risk. Our studies have demonstrated that in instances of an inverted yield curve, long-term Government bonds have shown diminished ability to shield against declines in equity markets. Conversely, in situations where the curve steepens (with long-term interest rates surpassing short-term rates), long-term debt has exhibited the ability to garner substantial returns amid periods of declining equity markets.

What do we think of corporate bonds in this environment?

While corporate bonds still have a place, we find credit to be relatively overpriced. Whether examining investment-grade or high-yield debt, we are unable to justify an overweight position at present. The spreads investors receive for holding this debt are currently at or slightly below long-term averages. In other words, taking on risky debt like high-yield bonds offers limited yield advantages relative to risk-free alternatives. Additionally, given the heightened likelihood of a recession, relatively speaking, we are uncomfortable with current valuations.  

Final thoughts

In the near term, further volatility is possible, so managing risk is important. But Government bonds offer positive forward-looking prospects after inflation, and we continue to see merit in these holdings.

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

Adviser-to-client template: Address Market Uncertainty

For financial advisers to use with clients. This document is intended to support your service proposition to clients. It is produced by our investment writers with a deliberately light tone and structure. However, these are guidance paragraphs only. It is not guaranteed to meet the expectations of regulators or your internal compliance requirements. If you wish to remove or amend any wording, you are free to do so. However, please bear in mind that you are ultimately responsible for the accuracy and relevance of your communications to clients. 

 

Dear client, 

I want to take this opportunity to acknowledge your concerns about the current market volatility and perceived uncertainty. It can be quite discouraging to see the cost of living continue to rise at a time when investment markets seem to be treading water, as they have been doing for a few years. 

Indeed, we’ve faced a challenging time for all types of investors—from conservative to growth-focused—with the market presenting a mix of ambiguity and only selected opportunities for growth. We’ve endured a major reset in the economy, with higher interest rates causing a big change in sentiment. Even defensive-minded assets like bonds have experienced uncertainty. But it’s important to remember that it is precisely in such periods of volatility that the seeds of future growth are often sown. For example, we now have investments in your portfolio that are locking in sizeable yields, so we have a new baseline to grow from. 

Moreover, we still have every reason to expect markets will trend positively over time, even off the back of challenging economic conditions. Below we share some evidence, where we can see that global stocks have been positive in 26 of the last 36 years, with 7% gains on average excluding dividends. However, in every single one of these years, we’ve seen a decline (the red dots) and the average decline has been right around 15%. So, it’s extremely normal for the markets to misbehave as they trend higher. The message we want to get across here is that market setbacks are the price you pay for healthy returns. 

Source: Clearnomics, Morningstar Wealth, MSCI. 

On a brighter note, the investment team at Morningstar Wealth have been busy identifying some opportunities ripe for exploration. After conducting thorough research and analysis, they are becoming more optimistic after the reset, with certain asset classes and sectors that could provide attractive rewards relative to the risks involved. In some instances, where markets have sold off, we acquire these assets at attractive prices, seeking to improve long-term growth and income. Many of these opportunities are augmented in your portfolio already. This underlines the importance of not viewing the current market environment through a backward-looking lens but exploring every facet of it for potential growth. 

Uncertainty is Difficult, but Patience Pays  

We’ve not made the progress we hoped for in the last few years, but we remain confident in your financial setup and we have avoided the major dislocations to date. In some respects, your investments are holding up better than you might perceive. As one small example, those who invested heavily in long-dated bonds—which can especially appeal to some retirees—have fallen as much as 48% since inflation took off from 2020 to today1. That’s similar to what stocks experienced in the financial crisis.  

Remember, investing requires consistent effort, discipline, and the ability to ride through the highs and lows. I want to assure you that despite the challenging market conditions, we believe that your current portfolio is still well-positioned to meet your financial goals. Our goal has always been to align your portfolio with your risk tolerance and long-term objectives, and we stand by that commitment. The key now is to continue making informed decisions and stay the course. 

I am always available to address any questions or concerns you may have about your portfolio or any other financial matter. Your financial progress is our priority, and we are here to navigate turbulent waters alongside you. Brighter days lie ahead, even if it may require a dose of patience. 

I will continue to share valuable insights that will aid you in making informed decisions, keeping your long-term financial goals in sight. If you’d like to discuss any of the above, please don’t hesitate to reach out.  

Regards, 

Adviser  

1 Source: Morningstar Direct, from 31 July 2020 to 25 September 2023. Morningstar UK 10+ Yr Core Bond GR GBP index. 

 

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

The Threat of a Recession Has Subsided. Are Your Clients Prepared for the Next One?

By Danielle Labotka, Behavioural Scientist

 

There’s a saying in theater: “Bad dress rehearsal, good opening night.”

In many ways, we just had a dress rehearsal for a recession.

Though investor sentiment has since turned aroundnew research from Morningstar found that investors came into the year expecting a recession and, in many cases, were already preparing for it—and not always in a smart way.

But now that the imminent threat of a recession has subsided, it’s a good chance for advisers to learn from what investors did when they were worried. By getting familiar with what these decisions looked like, advisers can work better with clients to achieve their investing goals amid inevitable market downturns. After all, opening night is only better than the dress rehearsal if the actors have learned from it.

The results of the study suggest there are two major things advisers can do now: 1) play catch-up and 2) get ready to go on the offensive.

Catch Up on Clients’ Financial Actions

In the face of a recessionary threat, 87% of investors took at least one action to prepare for a recession. For about half of all investors, that included touching their investments.

Given the sheer number of actions being taken by investors, it’s no wonder that 38% of investors took at least one imprudent action (such as pulling money out of stocks when the market was down). Overall, the results indicate that investors changed how they were handling their finances because of the threat of a recession, so their situation may look different than it did a year ago.

Moreover, financial advisers may not even know the full extent to which their own clients responded to the threat of a recession. We saw that 38% of investors with advisers did not consult their adviser before touching their investments, and investors reported consulting their adviser before making imprudent decisions only about a fourth of the time.

With fears of recession fading into the background, it’s a prime opportunity for advisers to regroup with clients. There may be changes to clients’ finances to be dealt with, and if they made an imprudent decision, it’s better to catch it now than let the effects compound over time.

Get Ready to Demonstrate Your Value

Investors were largely not making decisions on their own: They reported seeking advice from external sources 61% of the time before they acted. Though no one source dominated investors’ attention, financial advisers only captured a small percentage (8%) of the advice space during this time, falling behind family and friends (24%), websites (23%), and social media (11%).

In many ways, the finding that people tend to seek out financial advice before preparing for a recession is a silver lining. It offers new inroads to demonstrate the value of financial planning, both for those who don’t currently work with an adviser and those who may be typically more disengaged.

However, advisers must be ready to meet investors where they are in times of market uncertainty. Advisers can take this reprieve to build trustworthy content (newsletters, blog posts, and so on) to make available to investors the next time there is volatility.

3 Takeaways to Help Clients Prepare for a Recession

  1. Perception is reality. When investors perceive a threat to their financial security, like an impending recession, they will often try to mitigate this threat. In this way, just the threat of a recession can impact people’s finances (even if it does not materialize). In our study, we found most investors had already adjusted both their personal finances and investments to account for an expected recession. Therefore, advisers should keep in mind that proactively checking in with clients when there is a recession buzz can help them guide clients into taking the best actions for their situation.
  2. Check in with clients about changes spurred by the threat of a recession. Although investors with advisers tended to consult their advisers before changing their investments, they still did not consult their advisers about 40% of the time. Investors consulted their advisers even less often when making changes to their personal finances, like seeking additional income. The break in recession talk gives advisers the opportunity to touch base with clients, address their reactions to the threat of a recession, and if necessary, get them back on track.
  3. Be prepared for next time. Investors began seeking advice for a recession, but not always from advisers. As such, advisers can prepare now to be a go-to source for advice the next time investors feel the threat of a recession. In our report, we provide a guide for advisers to create resources for clients and investors during times of uncertainty, and action plans for engaging with clients when recession fears are heightened. Advisers who are proactive in their preparation for the next recession scare will be more equipped to head off client missteps.

 

 

 

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

 

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

 

 

Don’t Let Your Emotions Invest Without You

By Danielle Labotka, Behavioural Researcher

 

Our financial plans may be crafted carefully, but when emotions run high—either because of events in the market or changes in our own situations—something inside us screams to act now.

Suddenly, that financial plan is but a distant memory, and we’re posed to make a thoughtless decision that could cost us money. What happened? Why has our thought process changed?

Some call it the lizard brain. It’s a part of our brain that oversees the choices that were necessary to keep ancient humans (and ancient lizards) alive—like the fight or flight response. Conscious thought is slow, and because the “lizard” part of our brain is concerned with survival, it kicks in to help us take quick action without consciously thinking about it first. It’s that part of your brain that can lead you to scurry away like a gecko trying not to become a bird’s lunch, or to feel like Godzilla stomping through a city.

Given the proliferation of the lizard brain across many species, you can probably guess that it is very good at what it does. But it isn’t good at investing. So let’s talk about a few ways to regain control of your decisions.

We Can’t Let Our Lizard Brain Invest for Us

Investing requires you to work in a different state of mind than the lizard brain specialises in.

To invest well, you have to make a plan, pay attention to the long haul, and stay the course even when things get rocky. Your lizard brain, though, wants to you react quickly to whatever immediate threat you are facing.

In the abstract, you might not think about financial issues like losses to your portfolio as a threat; after all, it isn’t the kind of life-or-death threat the lizard brain was developed to handle. However, , as if they actually are a physical threat.

Because our body gets hyped up, we might find it difficult to stick with conscious thought and not let our emotions make decisions for us, which can lead to investing errors when left unchecked.

How to Regain Control of Your Decisions

Fortunately, we’re not helpless against the tyranny of the lizard brain.  we can effectively regulate our emotions through cognitive change. Cognitive change is when we adjust how we think about the situation (or ourselves) to help alter our emotional response to it.

 

The next time you see investment news that gets your heart pounding, take a step back and try one (or all) of these approaches to reframing the situation to ensure your emotions aren’t making decisions for you.

  • Reframe the emotion. When you’re experiencing a negative emotion, it can help to see the emotion from a different angle. This can be as simple as reminding yourself that what you’re feeling is normal. If your retirement accounts aren’t on track, you might think, “This is so stressful!” But instead of leaving that feeling there, you can go further to reframe it. Remind yourself: “It’s normal to feel stressed when I don’t think I’m on track for retirement.”
  • Reframe the problem. If a particular issue has your emotions heightened, you can also reframe the problem itself. What if, instead of just being a problem, there’s a silver lining that you can focus on? For example, down markets can be an excellent time to adopt a contrarian attitude and see them not as a scourge to your portfolio, but rather a chance to invest while everything is on sale.
  • Reframe your point of view. Emotions can make it hard for us to see the forest through the trees. We’ve all had the experience of helping friends and family through moments of heightened emotion by providing solutions that were right there—but that they couldn’t see. Try to take a step back and view your situation from the perspective of an objective observer. For example, if you’re feeling swept away by the excitement of a hot new stock, take a moment and ask yourself what you would recommend to a friend in this situation.

When our emotions get going, we tend to want to respond. By taking the time to reframe the situation, you can give your conscious brain a chance to catch up to your emotions before you act.

 

The author or authors do not own shares in any securities mentioned in this article.Find out about.

Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.