DURT(y) Business
So thank you today for joining us or joining me for this presentation around a decision framework that I like to use when helping people make better decisions with their money. We call it our sort of DURT method. So hence the title of the presentation, the DURT-y Business of Decision Making.
So quick disclaimer, not really an issue today, we won't be covering anything in particular, around financial products, but nothing we're going to cover today will be advice. That's pretty much general information and background stuff only. So please don't make any choices or decisions based on what we cover today. And we are recording a presentation, we are in the process of chopping up the other presentations we've already done. So there'll be something to get posted now as well. And all the webinars we're recording are being posted on our YouTube channel as well for future reference. And if you have anybody you think might benefit from what we're covering, feel free to share.
Okay. So where all this has come from is, I've been a financial advisor now for nearly 16 years. And over the course of that career, I spent a lot of time helping people make better choices. And early on in my career, it was really easy. The decisions are really simple, really straightforward. It was really black and white, here's a good option, here's is a bad option take the good option every time. As the complexity of the advice that I've been given, giving the people that we're working with the development of the profession, it's continued on, those black and white choices and decisions are becoming less and less frequent. And what I'm finding is that we are confused, which is a good thing we are confronting more frequently, decisions are probably sit in that gray area, more than purely black and white. And so we have a method we use in our advice process that helps us come to a recommendation for people around making those decisions and choices. So it's that shift away from black and white transparently simple advice, recommendations to things that are caring, a lot more nuanced, a lot more detail, a lot more pros and cons to consider, which can be quite overwhelming. And I think for a lot of people that aren't seeking advice, that can be a really big hurdle to starting to make those choices around money, we see a lot of people that are just continuing along out of inertia, continuing on with momentum, but not really going in any particular direction. Because their decisions are just too difficult. They're just too complicated.
So as background to this as well, one of my objectives for the people we work with is to help them make those decisions and make those choices but to make them with intention, make them with a clear consideration of what they're looking at and what the potential consequences could be. And within that awareness of what it means for their personal situation. So I was introduced to a pope haven't read it yet, but called the path was PA, which is all about kind of the default definition of success that we each find in a particular niche or cohort that we're in. So the example given was professional accounting practice, the path for success there is coming as a junior becomes a senior becomes a manager, work towards partnership. And that's the default pathway. And the reason I mentioned that is what I like to do. And what I think is really valuable is questioning that default pathway. Because at each of those inflection points, people can make a decision. And it doesn't have to be the default one that we make by reflex or just because we're following the herd to an extent. I'd like to help people interrogate and query those decision points and put them in the context of what they want out of their life. And often, you know, they'll follow the same path, but at least with that intention, with that consideration, with that awareness. But in doing that, it helps I find to have a framework around how we're approaching those decision discussions. The other one that I quite like to use is the DURT framework, which is we look at the Downsides, the Upsides, the Risks and the Trade-offs. Handily, it obviously forms a nice easy to say acronym. But there's a reason I start with the downsides first, it's not just my natural cynicism and skepticism.
Quite often, when we see people, they are excited about the potential of an opportunity or an event or something that's coming along their way. And it's really easy to get swept up in that the new business idea, the new job idea, then you house, the new product, however it is, and that's completely fine. But I think my role as a professional advisor is to come at it from the other direction. What can go wrong, be that sort of Negative Nelly and try to rain on the parade a little bit, just stress test that, is there a provable and achievable outcome that we can trace here. So it's not just that we're starting because it sounds good and easy and saying. We do deliberately start from the downsides because I think if we can Identify them clearly communicate them clearly that it helps make the decision seem a lot more realistic.
So the four aspects of the dirt framework are the Downsides, the Upsides, the Risks and the Tradeoffs. And this feeds in because it comes directly from the methodology we use when we're preparing and providing advice to people. So if you've ever worked with a financial advisor, you will have received a Statement of Advice.
And the Statement of Advice is a document, we've covered this previously. But it's basically, here's where you are, now. Here's what you want to achieve. Here's what we recommend. Here are the other considerations, the other considerations a witness fits in. So we're recommending somebody change Superfund, there's always an attachment to that, that says we're recommending this, here are the reasons why. But here are the other considerations, here are the downsides. Here are the benefits. But here are the risks. And here are the tradeoffs. Because reflecting back again, on that lack of black and white decisions, a lot of our options are do this because this is much better for you. But you need to be aware of this potential cost, it's actually got to the point where I'm quite skeptical of black and white advice. We review advice occasionally for clients or come along or for other advisors. And when the advice is positioned as a complete failure complete, like just, here's what you should do. No brainer, absolutely clear, it always gets my alarm bells ringing, because that's very rarely the case, it still happens if you're in a real dog of a Superfund or a really bad insurance policy moving is going to be to your unmitigated benefit. But often there's more to it than that. And we're hoping.
This is just the framework we use to help prepare those recommendations. And the focus for all of that when we're doing it is we're trying to find something unbalanced, which I'll come to in a sec. But first, some definitions. So when we're talking about downsides, we're talking about the reasonably foreseeable negative impacts of the choice that people can make. So there's a few key points there, the reasonably foreseeable aspect, I think, is quite important. We ignore or we don't include, or we can't include things like, you know, complete black swan events. So hedging Superfunds, perhaps the Superfund, you move to goes broke, APRA needs to step in and cover their liabilities and your spread across to another different Superfund, that is not a reasonably foreseeable outcome. So it's not something we include in our analysis, our analysis would be eight feet long, but also needs to be the negative impacts of the choice. And part of the reason we do this is so that then we can sort of weigh up the positives and the negatives. So it's really important that we're clear on that aspect here. But so it needs to be negative impact of the choice that we're recommending people make. And that needs to be a reasonably foreseeable one.
Now, the reason I'm going through this, again, we approach it when we're preparing advice. But my hope is that it can also act as a tool for the people watching this to help them approach some of these bigger decisions. Because of the pros and cons is a good one. Risks better or cost of benefits, that's a good one. For these captures, I think a few more on the other aspects of making big decisions.
Always the upside. So this is where again, that bias kicks in, we use a conservative assessment for the likely benefits of the option. So we've advised some people over the years freak injury, sorry for frequently, that has been given the opportunity of buying the business they work for or buying another business. And so they come in, and they've got an offer document, which is fantastic. And it lists all the benefits of the positive, wonderful business that they could be buying. And there's always a set of cashflow projections in there. And that always makes the business look like you're buying it when it's a baby business. And it's eventually going to be on Google within five years. We put a deliberate dampener on that. And I think it's important that we all do that when we're making these financial decisions or any big decisions. I believe it's better to underestimate the positives and overestimate the negatives so that then you're limiting the impact of disappointment. So if you go into something thinking that it's all going to be all shiny and rainbows and unicorns all the time, that's probably not going to be the case. Most financial or big life decisions have some great unit. So if you're going to think it's going to be 100% Wonderful, and it's only 90%. Wonderful, you have a good chance of being disappointed. But I feel, again, might just be my natural cynicism. But I feel like if you're going in with tempered expectations, it gives you greater clarity when you're making the choice as well. So it's definitely the approach we take when we're preparing our class.
The risks this is a big thing of advice. Any financial decision or move you make carries with it risk. And risk is a whole another big discussion that we'll cover up in another day because it's a huge spectrum of events. So I like the framework when I'm looking at the risks of it being a function of likelihood and impact, by which I mean, is it a big risk? That's unlikely to happen? Or is it a little risk, it's really likely to happen. And what's the impact of all of that. And sort of the classic example here is an example, the risk of your house burning down. Now, the likelihood of that statistically, is actually really low. But yet, we all have insurance, because the impact of that happening would be enormous. So huge impact multiplied by a low likelihood, statistically speaking, actually would make a small risk. But the impact is so big that we offset it, but we can't with insurance.
So we take a similar approach when we're looking at preparing advice for people. So we look at the likely and potential risks that they'll be accepted by taking on a recommendation. So again, changing Superfund, a likely risk of doing that is that the investments that you move into might underperform the investments that you're leaving. And that happens, there's no real way to avoid that this is a risk that you need to accept, how likely is that risk? And what is the impact of that risk is a different matter.
Another big risk, particularly if we're changing, say, insurance policies, the risks of things going wrong at claim time. And we'll explore that in a second in one of the examples that we'll go through.
The final item that we look at when we're sort of running decisions through this framework are the tradeoffs that are involved. And these are the items to consider, or to think about when you're balancing off the costs and the benefits. So it's kind of what's the downsides versus the upsides. How do I feel about that? What are the risks versus the upside? How does it all interplay. I'll stick to the same example. But changing Superfund. So the tradeoff can be removed or Superfund, it's cheaper, it's easier to use, it's going to lead to higher balance for me at retirement. But the administrative hassle of changing and letting my payroll department know that I'm changing Superfunds and getting new details is a pain in the neck. But kind of a tradeoff is the tradeoff worth it, it's really up to you to decide. In my opinion, it does. So therefore, that's what we recommend. Insurance is another big one that'll help to in a sec, you know, is it worth going to a cheaper insurance policy to save money, but it's lower quality. Where is that sort of sit in a suitability spectrum?
And the big point, and I've alluded to it earlier, when we're preparing this advice, there, a legal duty is to meeting people's best interests, which has a conclusiveness and a finality that can be quite hard to reach when you're preparing advice. But when you dig into that the standard is on balance, is our advice going to improve a person's position is it going to be in their best interest on balance. And that's really where that trade off point comes through. So that discussion about the insurance change.
Person A, it might be a dreadful idea to change insurance policy, they may not see any benefit in losing those particular features and values simply for saving money. So in that case, in their instance, on balance, they don't have to keep the insurance, but cut the trade off or pay the high premium. Person B however, might be incredibly cost conscious, really limited budget, and they can no longer afford the blue ribbon, top shelf insurance policy, so downgrading to bring in the cost below where it is now. That's an acceptable trade off. So on balance, it's in their interests to make sure that it actually reflects what they need to do.
And this is where I think our occupation or our profession can get things wrong, sometimes there is no such thing as universal advice. There's no such thing as one size fits all, it needs to be very tailored and very particular very bespoke. And to anybody who has worked with an advisor in the past, just make sure that is what you're getting that the advice has been really specifically tailored to your best interests. Again, with those advice reviews that we do, sometimes we see things, people get channeled into certain products or channeled into certain solutions, regardless of the problem. You know, every advice firm has a hammer, it seems and therefore everything looks like a nail. So it needs to be really bespoke and tailored. So it's very much that idea of on balance. And that applies through to if you're using this framework for your own decision making as well. There can be a pressure or an inclination to think that there must be a right answer. I've been given a choice that decision or dilemma there must be a right solution here and if I just think about it hard enough and ask enough people look around and I've read enough Looking around on social media enough, I will find that right answer. And the unfortunate realization I'm coming to as I get older is often there isn't a right answer, there's a better answer. And so this concept of it being an unbalanced decision, I think is really critical when you're approaching it.
Now, the downside of that is sometimes the unbalance of playing the probabilities, doesn't play out the way you want it to. So our person B that we were talking about before, opts to go the cheaper insurance policy to keep some sort of coverage, on balance that is completely in their best interests. But if five years down the track, they have a claim that they would have been paid for under the old event, and not the new event. That's a really, really bad outcome. But yet, on balance, they made the decision that was most appropriate for them, and in their best interest with the information they had on hand at a time. So unfortunately, some of these decisions also just don't work out. So what we're trying to do with this framework is to make it easier for people to make consistent decisions, in line with their interests. Based on the information they have at the moment; it is not a cannot ever be a guarantee that you will be finding the right answer each time. We are all slaves to probability in life. And sometimes probability no matter how much we work on; it doesn't go our way.
So select some examples. First example, here are three different Superannuation accounts, should I consolidate them into one fund? This is probably often an example of knee jerk advice. So the knee jerk or default reaction amongst advisors has always been, I think this is extended to the broader public as well. If you have multiple Superfunds, you should combine them into one and save fees. The reality is, as with everything else, a lot more nuanced than that. Sometimes it can be a good idea, sometimes it can be a terrible idea. So the framework that we look at when we're analyzing these kind of options for people, what are the downsides. So changing Superfunds, you will often have to sell down the investments that are contained in the fund. And that can trigger some tax liabilities if you have some capital gains in there, or if you've got some other charges that might apply. So maybe you get stuck with brokerage, maybe buy sells on the funds that you're in within the fund that kicks in. So those can be relatively expensive costs, we disclose them in the document and the advice that we give, but sometimes if you're doing it yourself, it can be quite hidden as well. So keep in mind that Superfunds they will pay. So different pays 50% tax on earnings, income, and capital, but you get a discount within the Superfund of 1/3 of the tax rate. So essentially, you pay 10% tax on capital gains. So if you've had fun for a while and been 10 years, for instance, and you've got a fair capital gain on there, 10% of that might come off the top and go towards tax.
The big one and the big, most impactful one that I've seen through reading a lot of the Ombudsman decisions and just being around advice for a while is the loss of insurance. So quite regularly, three different Superfunds you might have three different life insurances, disability and services income. And you consolidate them all into the whiz bang ABC Superfund because it's a lot cheaper. But you've now lost all that insurance. So you either need to go without that insurance, which is an option, or trying to find new insurance if you can. Now, that sounds quite easy in theory, but if you've had a health event, if you've had any sort of deterioration in your health, if you've had really a history of stress or anything like that, getting that new cover can be really difficult to the point where for a lot of people, they cannot get new color. So people have gone from a scenario where maybe across three funds, they've got $600,000 of life cover, merge all that Super into ABC Super, no cover at all, and then passed away. That is a terrible outcome, a huge downside for their family. So that loss of insurance is for us a really big red flag. It's a big brake for us, a B-R-A-K-E when we're looking at Superannuation switching advice for people because it often can't be fixed. It's kind of a one-way street.
The other downside is that it is typically doing it yourself, but a huge administrative hassle. We're dealing with some people at the moment. She has two Superfunds. One was put in place with her very first job. So she was 16 and got a new job. I think it was at Maccas and got a new Superfund set up. But her boss at the time spelt her surname wrong. So that's really quite hard to fix. The other fund that came through as part of a divorce settlement, and it's in her married name, but she's now changed her name. But the paperwork that's set up that whole settlement if she didn't sign it, that's not through the court orders. So it's a real mess. Now we've put probably eight to 10 hours of administrative work into that just to try to get that resolved. And we're getting pretty close. But the reason I mentioned that is anything to do with Super where you're making changes, is administratively a hassle. Particularly if you're looking to leave Superfunds. So cynical hat on, they make that a lot harder than joining them for whatever reason that may be. That's before you start thinking about, okay, well, which of the funds that I'm consolidating into? Will I be making my work contributions too? Who do I have to notify at work? And so that form I have to fill out? How do I do that none of it is insurmountable, just takes persistence, transparency, good note taking. But it is a hassle. So we count that as a downside.
The upside, though, can be some pretty significant fee savings. I caught up with some clients that we helped five or six years ago, we moved them out of a quite expensive Superfund. And at the time, the shift to save them about $4,500. So we then sort of disengaged, you know, there wasn't any more work for us to do for them. And we caught up again, after about five years, we've recalculated the benefit of those fee savings so that over that five-year period, and it's close to $30,000, we're saving them in fees by making that change to a cheaper Superfund. Unabashedly proud of that benefit for them. Because in that particular case is about eight months’ worth of extra retirement income, before we allow for any compounding. So the savings that you can generate by moving to a cheaper, Superfund should not be sniffed that sometimes the third one you're moving to or have better different, more diverse investment options. So some of the industry funds, although they have come in a bit better lately, some of them have very limited investment venues. It's kind of you know, conservative, moderate, balanced growth, high growth shares. Some people that's completely perfect, arguably, for most people, that's completely adequate. But for some people, they want more control, they want more detail, they want to be able to really establish really good strong portfolios, that's just not achievable with those Superfunds. So it's an upside to moving as well. And, you know, once you have gone through that administrative hassle of consolidating down to the fund, year 2,3,5,10, should be a lot simpler, because you've only got one fund. So instead of running two funds, at the same time, you've got just the one that does make life a little bit easier. Let's mail and then you've got the risks.
So you've got the risks that come up with investment choice, you've got timing risk, you know, that means that I moved out of Superfund A on Monday. And by the time the money gets across the Superfund B on Wednesday. That's when the money actually appears in the account. On Tuesday, there's the very minor risk that we have a complete market meltdown. So GFC hits on Tuesday. On Wednesday, your moneys worth a lot less than it's eventually it’d be to your benefit of you because you'd be buying more units. So probably the other way around, we have a market boom on Tuesday. So you're buying fewer units. When you get back here, there's a very small provider risk. So for instance, the provider you choose to use obviously behind you moves to a good cause hassles cause issues, we have some pretty strong legislative protections in, in Australia, but it's the low risk.
The biggest risk with Superannuation is always going to be legislative risk. politicians and political parties don't like leaving Super alone, so they always mess around with it. And finally, the tradeoffs are that discussion that discussion you should be having with your advisor, but still have with yourself. You know, how do I weigh this up? What is the cost of changing? What are those downsides versus the benefits and the upsides? What's the value of the hassle? Now it could take six months to get this done compared to the simplicity of the future. And that decision? I'd like to have that discussion with people. I tend not to advise people based on it like to tell people what the tradeoff they should choose is and very much needs to be a personal thing.
I have an older income protection policy, should I keep it or move to a newer one that costs less? There was some background here a couple of years ago 2021. The regulator mandated some changes to income protection policies that essentially downgraded the quality of any new policy to make them more profitable for insurance. Insurers were offering these policies with bells and whistles, but they weren't pricing them properly. So they were losing money. The value or otherwise of a government regulator stepping in to correct a public or private company’s mistakes I'll leave to others to work through. But there's a point where there's a threshold in, I think was November 2021, where every new income protection policy after that is demonstrably inferior to the ones that were available beforehand. It should be cheaper but inferior. So where we're seeing a lot of people sort of have to make choices now is I have this whiz bang policy that's costing me a fortune, those cheaper policies available. Now I know they're worse, but they're a lot cheaper. And I need to save money because everything's do and what do I do? So here's where we run through the downsides, upside risks and tradeoffs, discussion and advice process. So you know, the big downside here is your downgrading benefits to the point where making a successful claim becomes less likely. And then the via quantum or the benefit of that claim being paid is less than it would be, that's a huge downside as a huge negative impact. You'll have to go through a new underwriting process. So if you've had any kind of health event, or any changes happen, since you got the new policy, you will be assessed by an underwriter and they may apply new conditions to the policies. So a common one here is you know, I take out income protection on 35, not fit but in good health, or, more accurately, I just haven't seen doctor and I'm there 42. But a couple of years ago, I had a really bad back pain. I did my back doing suddenly all healed now but it's there, I will then most likely get a back exclusion on any new coverage. Now, the reason you get a back exclusion is a higher likelihood of claiming because of something related to the back. So you will, if you go down this path, no longer be covered for something that's more likely to occur. This is a huge again, a huge downside to accept when you're making this kind of change. And by moving to a cheaper policy, there's no guarantee that next year that policy will remain cheaper. So unfortunately, insurers have a long track record of getting people in cheap and then ramping up the price over the next couple of years. Huge downsides.
The upsides though, unavoidably for people who are on a limited budget, but need some level of coverage, it will be cheaper to make this change. And we're seeing savings of 10% 20% 30% by moving to an inferior policy. It's hard to recommend that the truth be told, but when it's in somebody's best interest to move to something that's going to save their family money becomes a bit easier. And the other upside might be you really dislike your insurance, we have quite a few people that have a hate-hate relationship with their insurer, this will move you away from them are the risks like a flag, you've got some underwriting issues, claiming can be a bit more difficult. There's no quantifiable data around this. And that's primarily anecdotal. But I think the argument stacks up that if you have a policy with an insurer for 20 years versus 20 months, the claims process for the 20-year policy is likely to be easier, you're more likely, I think, to get the benefit of the doubt when you're going through the assessment. I can't prove that that's completely appealing those but that's the feeling I have from the claims I've seen.
You have the issue around non-disclosure risk. So that has also changed, that's a rabbit hole, we won't go down. But you are obligated to tell the truth and give the insurance information that they would rely on to make an assessment. It's kind of easy to miss some of that stuff, you might forget about that high blood pressure test you had five years ago, or some people were a bit cheeky, but we've had people forget most of the worst ones we had. We had one that had a blood test that sort of showed that they may have had a heart attack. And I forgot that subscription stuff there. But there's still a risk. And again, that pricing risk that the pricing could move against you.
So we're back and trade off a territory where people need to start thinking and start working out weighing up in their mind. What's more important to me, and what's going to be in my better interests to save money now. We'll lose the benefits later, and your insurer versus the devil. Yeah, what's the approach there?
I think can be kind of difficult. And we talk a little bit later on about choice context. Because what we're really talking about here is making a decision, almost making a permanent decision based on a temporary state of affairs. So, you know, if you're 40, 62-year-old, you might really need those extra benefits that they have. But 40- to 61-year-old units to find a way to pay for that. So there's an immediate tension there that needs to be resolved. And that can be really difficult. And the final example we'll work through today is this one, should I retire early so that I can enjoy it while I can. Or keep working to make sure I have enough funds. And this is one we're coming across a fair bit. Should I enjoy my money now while I'm in good health, or should I prioritize my longer term late life security.
So these examples here relate to retiring early. So if you were to decide to retire early, the downside is, you will always, in my experience, be somewhat fearful of running out of money. And that can translate into understanding, it could translate into scrimping and sacrifice when maybe you don't need to. But it's a subconscious feeling or need that people can carry with them when they retire early.
The other one can be prematurely leaving the workforce, which sounds silly, you're retiring early, that's what you want to do. But there are a lot of benefits and positives that come from working socially, in terms of your self-esteem, in terms of your competence, in terms of your dexterity, all of these things, leaving the workforce early turns the tap off on those positives pretty quickly. That's another consideration. The upside is you get to retire early, you're hitting the road early, you're taking the holidays early, you're spending all the time with the grandkids early. These are huge and wonderful upsides, but they come at a cost and one of those costs is the risks that are involved, there is a very real risk of running out of funds too early. And for a lot of people they dread the idea of, you know, turning 78 and relying completely on the $28,000 a year single age pension.
Another fear that people have such a fear as a risk is the chance of losing your health early on. So it's not unusual for people's health to kind of deteriorate in their late 60s, early 70s. That can limit the enjoyment you can have in early retirement, which kind of eliminates the benefit of that worry about money. You kind of lost the upside, but he's still stuck with the downside. That's a risk. So the trade off the people need to work through them is do I want that greater enjoyment earlier? Or do I want to be more confident I'm not going to run out of money. I met with some people the other day who have had a very eventful life, they've done a lot of travel. He was a minister in one of the big denomination churches. And so there's been a lot of time traveling around Australia, living in different communities that travel through the Outback, they've traveled through the territories. And so when we talk about what their retirement looks like, it's not going to be a lot of travel. They've brought that enjoyment forward. So in their case, it's more about fulfillment, meaning and security. Which brings us to the point. This approach has some limitations. And one of those limitations is that again, there's no universally right advice.
These frameworks are not, or this framework is not an equation where you pop in the variables, and it spits out the same answer. You and I will very likely get different answers if we run the exercise on the same variable. Which I like to I think I would, and I look at it as a person's choice context. And I'm sure there's a bit of time for that. I'm sure the psychological researchers out there have a much better phrase for it. But when we're looking at advice and advice for people, their choice context is why they make the decisions that they make. But what we're really talking about here is what you are bringing to the table when you're making these big decisions. And this is what makes advice. So this is why it makes it so critical that advice is individualized in my opinion. Because there's a blog post that's going out around the same topic. And we go into a lot of detail on how to do case studies, but you've got person A and person B. At the surface level, they're the same mid 40s 2.4 Kids, two cars, big mortgage investment property, Superannuation, same income, same earnings, same expenses, surface level, same person, they should get the same advice or make the same decisions. But when you start looking into their choice context, one grew up wealthy one grew up, making ends meet, barely making ends meet. One is an only child; one is a family in a family of four. So their considerations around inheritances and things like that are very different. One spent their 20s traveling, the other spent 20 years working in the family business. So we start looking at this choice context. And the reason these factors are relevant is that that shapes their perspectives on money. And when we're talking about choice context, what we're trying to gauge or get an idea of really is people's different perspectives, their different histories, their different beliefs about money. So for some people money is a means to an end, it pays for the life they want to have. For some people money is a measure of their worth. Their ego is tied up in their wealth. And none of these are problems. None of these are negative. These are all neutral perspectives and viewpoints. But the vehicles that can be used as demonstrations of these feelings can be positive or negative. So everyone has different beliefs. And finally, people have different goals and objectives. So talking about something like retirement. So for people looking to retire, they want to retire at 60. But what if they want to retire in different amounts? What if they have different family needs priorities, perhaps one has a spouse who is completely dependent on them for support. The other one has a spouse who wants to keep working and earn a high income. So in each of these cases and examples that I'm flagging, our advice would be tailored to what people need it. Because as I've said a few times, there is simply no such thing as universally right advice.
And this is where I think things like that Super consolidation idea can be dangerous for people, because you hear it on the news or on breakfast radio, or on some Superannuation ads or articles in the paper. The default has become you should consolidate your Superfunds. And yeah, in many occasions, that's the right advice, but not universally. For many people changing Superfunds is a terrible idea. So that's why it needs to be really quite considered, which is why we use this framework to try to explore what I considered an intentional decision look, it looks like that. So that's the limitation of this framework is that it does need to be very tailored to your individual choice context. Another limitation is, if you're familiar with Daniel Kahneman his work, he and his running partner at the time, Amos Tversky, did a huge amount of work around biases and the cognitive path we follow when we're making choices. Choice architecture think no, that wasn't their heuristics. That's what they call it.
Heuristics is the way that people make decisions. And what he did, I think he passed away quite a while ago. But then economists moved on and he's returnable. This is an amazing book, if you get a chance to read it. It's not a short book, but very, very eye opening. And what it essentially argues is that there's two ways that people make decisions. There's two ways that people think system one and system two, system one is kind of our lizard brain, instinctive, rapid built on presumptions, and assumptions and biases, but it's an immediate decision. from something as simple as seeing something kind of Brett Brown and flexible. Looking on the bushwalking track, you’re thinking it's a snake jumping away, to making a snapshot assessment of somebody you meet at a cafe or on the train. These are very snapshot very knee jerk reactions, this framework that we're talking about is absolutely rubbish for them. Because there's no way this framework can overpower that kind of instinctive reaction. But it is good for those systems to think which kind of and sort of describes as deliberate rational, considered thinking and choices. So there's this idea in economics in particular, that every person, humans are inherently system to rational, or Kahneman shows is that that's not really the case, system one is still a very powerful, arguably domineering part of our personality, but system two the DURT framework is really good for system one, it's almost completely useless.
So now, there's some steps you can take right here. This is not a prescriptive process. The reason I'm presenting this kind of strange topic on a series of financial planning webinars. And as a side note, I completely acknowledge that this is a really weird topic to bring up. Most financial planning webinars I have seen have been about, you know, taxation, benefits of different strategies, different product options, financial market updates, all that stuff's important. But I've deliberately included this in our financial fundamentals phase, because the way that you make decisions about money, the choices you make, and the maturity of the perspective you bring to the process will have a huge, bigger, I would argue bigger impact on your financial outcome than anything else just about because if you're somebody who's prone to making system one decisions about money, rash, emotional swept up in the crowd swept up in the noise persuaded by Tiktok, and Instagram ads, you will be chasing your tail for years and years and years and not really get anywhere. So you're going to make lots of motion, but not a lot of progress. If instead of the occasional decision, or you can approach these big choices and decisions using this kind of framework and with a lot more system to rational, deliberate, intentional, you will make better decisions, they won't always work out, but the decisions will be better and more better decisions over a longer period of time will lead to a better financial outcome. better then. Maybe not better than buying Macquarie at the bottom of the market, but that kind of it
So here's some steps you can take when you're approaching your next big decision. The first one is having a think about your choice context. Think about those perspectives, histories, beliefs, goals and objectives that you're bringing to the table when you're approaching that decision. And also, be aware that yours will be different to your partners to the person you're talking to, to the people at work, and to even to your families. Generally, siblings tend to be the closest with their choice context, because their formative experiences are generally very similar, but they diverge fairly rapidly after cover, everyone leaves the house and beats people.
So let's get you out of the debt grid. And it's easy, you know, it's a matrix to one downside, upside risks and tradeoffs, no debt one or two in each category. You know, I found you can obtain levels of depth when it comes to assessing these categories. But I found one or two to be most useful, because you're going to sort of put the big ones on there, you're going to start with the risk that your postal address will change. And therefore, you'll need to update the Superfund, like that's a kind of a nothing risk. And then just see if it helps with the decision at all. I mean, there's a tension with all of us when we're making these decisions that we can fall into the trap of using a system to basis to justify our system one decision. But hopefully, what this process helps you do is just be more deliberate around the choices you're making. Have a consistent framework to help you make consistent decisions, and just bring some clarity and intentionality to the choices you're making about your money. In the background, this is how we give our advice. If you're expecting us to give you a straight up and down black and white answer about a financial question, it's very unlikely. More often than not, you will get from us on balance. We believe that taking action ABC is in your best interest. Because after thinking about the downside, upside risks and tradeoffs, we believe it to be in your best interest. Not quite as snazzy as buy this thing or sell that thing. We'll leave it there.
Thank you for persisting and listening to admittedly a very weird topic. But hopefully it's been some years hopefully, there's been some value there for you. Because, you know, making better decisions, as I mentioned, will have a huge impact on your financial future. And there's my details. If you have any questions, any thoughts, if you want to query what I'm talking about? Complaint about it, compliment that whatever, send through an email to hello@advicegallery.com.au or you can call me. 0431664422 or check our website at theadvicegallery.com.au. We will go into a bit more detail there. And we are regularly posting our blogs and information over there. So in that note, thank you so much. Thank you for persisting Thank you for listening. If you have any questions, please just get in touch. And I look forward to speaking to you soon.