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How goals-based investing transformed this advice practice



Goals-based investing is redefining the investment industry. By placing the client’s dreams and goals firmly at the centre of the investment and planning process, it significantly enhances the prospect of clients reaching those goals.

More and more advisers are recognising the power of a goals-based approach to clarify a client’s goals and then align strategies and investments with them.

To find out just how a goals-based approach can benefit advisers, we spoke with Debbie Turvey, Client Service Manager at AMP Advice in Barton, ACT, who has helped oversee the incorporation of goals-based investing across their practice.


Hi Debbie, can you tell us about your practice and who your typical clients are?

We have eight staff, with four advisers and the remainder support staff. We service around 450 to 500 clients. I’d say our clients are primarily retirees or people near retirement, so we have a more mature client base. They include people from a range of careers. Based in Canberra, we obviously have former and current public servants. 

In addition to our main client base, we have another block of clients we service on a ‘reactive’, needs basis. They tend to be a younger cohort that mostly need help with insurance and super.

What are some of the common goals clients would specifically like to address in retirement?

It’s interesting, when our clients walk into our office, we ask them about their goals. They usually look at us and say, ‘we haven’t really thought about that’. Typically, they have come in for investment advice. They don’t really know what their particular goals are.

We begin with a more goals-oriented conversation, and we start to talk to them about to retirement. We get them to break down their needs a little bit more. 

It’s about helping people articulate what they really want to achieve and keeping that in mind as we go through the whole review process which generally makes them feel good about ticking off some of those goals they want to achieve.

A lot of them haven’t really thought about longevity of their capital, and how to arrange their financial resources to achieve various goals.

The main challenge, I would say, is helping people understand what some of the consequences are of doing different things. A lot of people want to help their kids. But they don’t know the consequences of that from an estate, Centrelink and capital longevity point of view. We want to help them understand the consequences of doing what they’re doing, and help them do it in a way that’s as smart as they can.

How do you go about constructing portfolios and using goals-based funds to meet specific client goals? 

We break it down into three main requirements – or buckets -- based on what the client wants to get out of their portfolios.

1. Non-negotiable (safety needs)

This ‘bucket’ ensures funds are available for living expenses, short-term expenditure requirements and emergency funding. 

We always make sure funds in this bucket are secure and readily accessible. 

For example, if the client’s basic cost of living is $50,000 a year, we would leave 3 to 5 years of their income requirements in fairly solid capital-stable investments to fund that. This will mostly consist of cash and term deposits.

This helps to ensure that longer-term investments aren’t drawn upon in times of market downturns and will have time to recover. It’s like the ‘safety net’ of the portfolio.

2. Essential needs

For those relying on their investments for cash flow, we seek to create an income stream to help cover living expenses. This draws on our ability to combine income-focussed solutions, any government entitlements, and existing sources of income to create a reliable cash flow – much like a salary. This portion of the portfolio is designed to create a regular income that can increase over time and provide some insulation from market volatility.

One of the funds we use for this portion of the portfolio is the AMP Capital Income Generator, which aims to deliver a known monthly income. This is particularly good for clients with a larger capital base who require income from their investments to fund their lifestyle.

Another alternative available is the Future Cash Flow Range for clients who don’t mind drawing down on their capital to achieve a known cash flow (increasing with inflation). These funds can be used standalone or in conjunction with other funds to deliver a desired cash flow profile. Whilst the cash flow is known for the Future Cash Flow range of funds, the capital longevity is less certain. Each of the funds will provide an estimate for the shortest and longest period the fund will be able to pay monthly cash flows to investors. Ongoing guidance is provided, depending on returns achieved, so clients can have visibility over capital longevity.

3. Future needs

This third bucket funds things like inheritances down the track or future expenses. Some clients also just like the feeling of continuing to accumulate wealth and making sure their capital doesn’t run down. They’re okay taking a slightly higher level of risk for this part of their portfolio. For this component of the client’s capital, we invest in more growth oriented solutions. The aim is to generate a higher return over time to combat the effects of inflation. These investments will need to be invested over a longer time horizon to meet the higher return objective and are likely to experience higher levels of volatility. However, this is aligned with the less urgent need to draw on these funds.

What do you see as the benefit of goals-based funds over traditional diversified funds, particularly in retirement?

Goals-based funds tend to have a lot more focus on protecting downside risk. This is particularly important for retirees because we all saw what happened in the GFC with more traditional balanced funds. They followed the market straight down.

Funds like the Multi-Asset Fund and the My North Retirement Fund put investment strategies in place that are designed to help reduce volatility and help protect on the downside.

The good part is that if you break the portfolio down for clients to show them that their essential cost of living needs will be met it helps them in times of volatility. They can say, “I know this part of my portfolio is meeting my goals and I understand what role the various investments play in my portfolio. And while I’m still going to see some sort of movement in the other funds there will be some downside protection and they are meant to be invested for the longer term”.

That helps clients stay the course and their portfolios won’t be damaged by panic selling in bad times.

How has following a goals-based approach to advice benefited your practice? 

Our clients appreciate that AMP has taken a real focus on producing types of investments that help with retirement outcomes. It helps clients understand how their portfolio is constructed and why. They feel a little more confident that some of that downside risk is protected for them.

For the practice, it takes the guess work out of constructing client portfolios and gives advisers confidence of outcomes for their clients. This in turn leads to happier clients and hopefully more referrals!

How has using goals-based products helped the investment experience of your clients? 

Just looking at the Income Generator fund as an example, clients really like it. Risk averse clients who wanted most of their funds in TD’s have seen a massive fall in the income generated. They can see whilst TD’s are capital stable investments, they are income volatile.

The Income Generator fund provides an alternative, though we explain there will be more volatility in their invested capital. 

Clients see the income coming into their cash account every month. They really like that. They can see it’s working and the volatility part doesn’t seem to matter as much to them because they can see it’s producing a regular and known income that helps fund their lifestyle or pension payments. 

The most important part of goals based investments is the ability for the adviser to be able to articulate to the client why they have used each of the investments and link it back to the client’s goals or needs.

With all managed investment there are key risks to consider. Please read the Product Disclosure Statement before investing.

AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) (AMPCFM) is the responsible entity for the AMP Capital Future Cash Flow Fund 6, Series 1, AMP Capital Future Cash Flow Fund 9, Series 1, the AMP Capital Future Cash Flow Fund 12, Series 1, the MyNorth Retirement Fund and the AMP Capital Multi-Asset Fund (“Funds”) and the issuer of units in the Funds. ipac asset management limited (ABN 22 003 257 225, AFSL 234655) (ipac) is the responsible entity of the AMP Capital Income Generator (Fund) and the issuer of the units in the Fund. To invest in the Funds, investors will need to obtain the current Product Disclosure Statement (PDS) available from AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232 497) (AMP Capital). The PDS contains important information about investing in a Fund and it is important that investors read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the Fund. None of AMP Capital, AMPCFM, nor any other company in the AMP Group guarantees the repayment of capital or the performance of any product or any particular rate of return referred to in this presentation.

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AMP's Australian operations are bound by the current Australian privacy legislation which outlines how organisations should manage and use personal information collected and held about their customers. AMP Privacy Policy

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