Jumping At Pre-Budget Shadows

Pre-budget speculation and kite flying is sometimes a distracting noise for investors. And the lead-up to this year’s federal budget in early May is, of course, no different.

Take superannuation for instance. The investment newsletter Cuffelinks recently mentioned the "daily guessing game underway" about possible changes to superannuation contribution limits, transition-to-retirement pensions, contribution limits [for high-income earners] and so forth.

And the newsletter adds: "For anyone making major decisions about super, it might be worth a visit to an adviser sooner rather than later." This suggestion makes much sense.

Yet even if you aren’t thinking about making significant super changes before the budget, perhaps consider calling your for reassurance that you are on the right track.

In practice, most super fund members making salary-sacrifice contributions and/or receiving transition-to-retirement pensions, for instance, would have setup or confirmed these arrangements for 2015-16 from the beginning of the financial year. And in most circumstances, it is unlikely that an adviser would suggest making changes to these particular arrangements at this stage based on what may or may not be in the budget.

One of the most critical ways that a skilled adviser can potentially add considerable and quantifiable value for investors is by acting as their behavioural coaches or trainers.

In this role, advisers can urge clients not to abandon carefully-prepared and still-appropriate long-term strategies in response to pre-budget speculation or higher market volatility – being two of the distractions now facing investors.

For the past 15 years, Vanguard has studied what it terms "adviser’s alpha". This is defined as the value that advisers can add through their wealth management and financial planning skills – and as experienced behavioural coaches to encourage a highly-disciplined, long-term approach to investing.

Read the most recent Australian edition of this classic research: Adviser’s Alpha, published in September last year.

Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.