Your Choice Context
My role as an independent financial adviser is to help people make better decisions with their money. And this can manifest in quite a few different ways, from:
Helping people find a ‘better’ super fund
Working together to set a sustainable budget
Mapping out their retirement plans
Finding answers to their financial dilemmas.
In each case, my advice considers a broad range of factors before providing our final recommendations.
What I’ve found over my years of giving advice, is that there are fewer and fewer instances of ‘black and white’ choices.
In fact, it’s made me outright suspicious of people when they say there’s one clear, indisputable ‘best’ option.
Because most financial choices require nuance and thought – they are ‘grey’, more than black and white.
Which is why I focus on the method we follow to help make these decisions more than the actual decision itself.
Before we apply that method, though, we work with you to define your ‘Choice Context’.
Your Choice Context
Which is a fancy term for ‘why you make the decisions you make’.
Because none of us make our decisions in a vacuum. We each bring our own unique perspectives, experiences and beliefs to any discussion about money.
That’s our history with money.
Then we have our own set of goals and objectives that we want our money to help us achieve. We have our own ‘ideal life’ that we want to pursue.
Which should be different for each person.
Finally, we have our own responses and actions that kick in after we’ve made our decision.
This amorphous cloud of emotions, considerations, experiences, perspectives and beliefs form your individual ‘Choice Context’.
And it helps us to know about this when we’re giving you advice, because there’s no use us advising a round peg to squeeze into a square hole.
For Instance
Consider two neighbours. Same age, same occupation, same family arrangements (husband, two kids, a Labrador and three fish).
They’ve each managed to put an extra $100,000 into their offset accounts – against their same mortgage balances, held over homes with, you guessed it, the same value.
They each come in to see us for advice on what more they could be doing with that $100,000.
On the surface, the expectation is that our advice would be exactly the same.
Which, unfortunately, is where some advisers stop.
One Of Them Is Not Like The Other, Though
But, digging deeper into their Choice Context tells us that:
One of them grew up in a household without much money, while the other grew up without ever having to worry about money.
One of them lost a parent early in life, to cancer, while the other sees both parents regularly.
One of them is deeply worried about losing money, while the other is comfortable taking risks to grow their nest egg.
One has never invested in anything beyond their super, while the other has lots of experience investing in shares.
-Finally, one of them plans to work all the way through to 65, while the other has a deeply held goal of retiring in fifteen years’ time.
So if we’re looking at two basic alternatives for them:
Keep the funds in the offset account
Invest it in a share portfolio
It’s fairly clear there’s no right or wrong answer. But there is, clearly, an answer that’s wrong for each of them.
Consequences and Considerations
For instance – recommending that our first neighbour (we’ll call them Claudia) put the $100,000 into a share portfolio is likely to be a bad fit for her.
She doesn’t have the experience to take such a big leap into investing, or the learned resilience to ride out the inevitable peaks and troughs.
While recommending that the other (Christine) keep the $100,000 in their offset account indefinitely would likely leave them feeling like there’s more they could be doing, and lead to them chafing against the advice.
And it may also not do anything to get them any closer to their goal of retiring early.
As such, I would describe that as bad advice.
But how do I, as an adviser, avoid giving people similarly bad advice?
I ensure that I understand their individual Choice Context, then use our DURT model to make sure our recommended decisions are suitable for their financial lives.
And in my next post, I’ll unpack just what the DURT model is – and how it can help you when you’re tackling those big, financial decisions.