Strategic vs. Product Advice – what’s the difference?
Whether you’re working with a financial adviser or looking to create your own plan, it’s important to understand the two main types of financial advice out there: strategic and financial product. While both can help improve your financial wellbeing, they serve different purposes and take different approaches.
Here’s a breakdown of what each type of advice involves and how to decide which is best for you.
What Is Strategic Financial Advice?
Strategic financial advice focuses on your overall financial picture, helping you build a plan that aligns with your goals—without diving into specific products like super funds or insurance policies. This type of advice is all about optimising your money management based on your personal circumstances, whether it’s retirement planning, tax minimisation, debt reduction or growing your investments.
Examples of strategic advice include:
- Super contributions: Advising on how and how much to contribute to super to maximise retirement savings or minimise tax.
- Tax strategies: Strategies like salary sacrificing, negative gearing, or advice on asset ownership, to minimise tax either in the current financial year or future ones.
- Debt reduction: Recommendation to pay off debt efficiently, such as interest only or principal and interest, offset accounts, snowball or the avalanche strategies.
- Investing: Advice on how to allocate your money—shares, property, bonds or cash—without picking specific investments.
- Cashflow management: Identifying effective use of surplus income to use for wealth creation strategies.
Benefits of Strategic Financial Advice
- Personalised financial roadmap: it’s tailored to your unique situation, helping you create a long-term strategy that accounts for your goals, values, and life changes, in addition to taking advantage of financial opportunities available through tax, capital growth and income strategies.
- Supports behaviours: Since strategic advice is often more holistic, it considers factors like spending habits, current level of financial literacy, debt management, and wealth accumulation strategies that influence long-term financial success.
- Flexibility and independence: Unlike product-specific advice, strategic advice doesn’t lock you into particular investments or products. Instead, it gives you a plan and the action steps you can implement yourself and then be adapted over time based on your evolving needs.
- Unbiased: Strategic advice is free from any product-specific commissions or influences. Advice is focused solely on what’s best for your financial situation, not driven or incentivised by sales of certain financial products.
Limitations of Strategic Financial Advice
- No product recommendations: You won’t get advice on which super fund or insurance policy to choose. While this keeps the advice impartial, some people might feel lost without guidance on where to place their money.
- Potential for overwhelm: Without product recommendations, you might feel unsure about how to get started.
- More involvement: You’ll need to do some research to find the right financial products to fit the strategy.
Now let’s compare strategic advice with financial product advice.
What Is Product Financial Advice?
Product advice, on the other hand, is all about recommending specific financial products—like a particular super fund, insurance policy, or investment. If you’re looking for help choosing the right products, this may be the kind of advice you’ll want.
Examples of Product Financial Advice:
- Recommending a specific investment portfolio based on your risk tolerance.
- Advising on a specific super fund for your wealth creation or retirement goals.
- Provide recommendations of life insurance or income protection policies and insurance companies.
- Recommending specific shares, managed funds, or ETFs based on market conditions.
Benefits of Product Financial Advice:
- Actioned recommendations: This type of advice is specific, actioned by the adviser, and focused on aligning financial products with your needs.
- Convenience: For clients who may not have the time or expertise to research financial products on the market, having a financial adviser narrow down the options can save time and effort.
- Expert insight: Advisers have detailed knowledge about the costs, features and benefits of the products they recommend.
Limitations of Product Financial Advice:
- Narrower focus: Unlike strategic advice, product advice sometimes has a short-term focus on selecting the “right” financial product at the time, rather than how that product fits into a broader financial plan.
- Product bias: Some advisers may only recommend products that they are familiar with or have access to within their license arrangements, limiting your exposure to the full range of options available. In some cases, there may also be a potential conflict of interest if the adviser is compensated by the product provider.
- Excludes financial habits and knowledge: Product advice does not typically help you with behavioural aspects of finance, such as curbing overspending to save for a goal like a home deposit, managing debt, or establishing long-term savings habits. There is typically less education and financial literacy building when there is more of a focus on products.
Key Considerations When Choosing Between Strategic and Product Financial Advice
- DIY vs done for you: If you like being hands-on with your finances and want to implement advice on your own, strategic advice is a great fit. But if you’d rather have someone handle the specifics for you, product advice might suit you better.
- Your goals: If you’re looking for a big-picture plan to help you manage your money over the long term, strategic advice might be the way to go. But if you need help choosing the right super fund or insurance policy, product advice may be more helpful.
- Scope of Advice: Strategic advice tends to offer a broader scope, focusing on your entire financial life. Product advice can be more limited in focus on specific decisions that may be just one element of your total situation.
- Cost: Strategic advice is often a one-off service or comes with ongoing tweaks as your situation changes, and it’s usually charged as a fee-for-service. Product advice, on the other hand, may come with additional costs for ongoing management of your financial products.
The Importance of Knowing What You Need
When it comes to managing your finances, it’s crucial to understand what type of advice you need.
Whether you’re looking for strategic guidance to boost your financial knowledge and confidence, or specific product recommendations to help you invest or save, knowing the difference between these types of advice can make all the difference.
Strategic financial advice helps you map out your financial goals and create a solid plan to reach them. Product financial advice, on the other hand, guides you in picking the right products—like investments or insurance—and having assistance to put recommendations into action.
By getting clear on your goals and understanding your strengths, you’ll know exactly what kind of advice will serve you best. This way, you can move forward with confidence and take charge of your financial future.
At Wealth Maximiser, our Wealth Coaches are here to support you with strategic financial advice. We don’t recommend specific investment products, so you can rest assured that our advice is completely unbiased. Instead, we give you the information, tools, and resources you need to make informed decisions on your own. And because we follow a passive, index-focused investment philosophy, we believe that with the right guidance, you can manage your investments yourself—cutting down on unnecessary fees and costs in the process.
Disclaimer
This information is of a general nature only and does not take into consideration your objectives, financial situation, or needs. Before acting on this information, you should review the Wealth Maximiser Financial Services Guide and Wealth Maximiser Terms & Conditions and consider this information in light of your own objectives, financial situation, and needs. Wealth Maximiser is operated by NobleOak Services Limited ACN 112 981 718 AFSL 286798.