Displaying items by tag: goalsbased investing

Thursday, 24 September 2020 15:20

How Goals-Based Investing Helps Clients

(New York)

Goals-based investing is an important approach for advisors to consider for their clients. More than just the idea of aligning a portfolio and its reporting with a client’s life goals, goals-based investing has the power to potentially transform the way a client thinks about their money and their portfolio. When it comes to saving and investing, clients constantly struggle with the trade-off of short-term sacrifices for long-term benefits—should I buy this flashy new car or have a better retirement? By focusing their finances and investing on the specific goals they have in mind (e.g. buying a vacation home) it becomes much easier to make that short-term sacrifice.


FINSUM: Goals-based investing makes a lot of sense with basic human psychology. Knowing I am saving for a vacation home makes it a lot easier to forego the new car purchase.

Published in Wealth Management

(New York)

The nature of financial advice needs to be constantly evolving to client needs. The industry is generally responsive to this, one need only look at the large growth of independence and fiduciaries since the Financial Crisis. One new direction clients are driving advisors towards is goals-based investing. The main idea is to invest a client’s assets with particular life goals in mind (and not just retirement!), and then report on the progress towards those goals over time. The aim is to empower clients to meet their objectives and make saving and investing feel less abstract. Asset managers are also getting on board. For instance, Franklin Templeton has just announced the launch of their new Goals Optimization Engine, which “provides investors with personalized investment paths for their unique goals, and allows financial professionals a scalable way to offer a differentiated investment solution and deepen client relationships”.


FINSUM: Getting into the behavioral psychology aspect of this, studies have shown that individuals often have a hard time saving now for gains in the future—the desire for instant gratification works against long-term interests. Therefore, by focusing on near- and long-term goals, you make saving less boring and abstract, which helps clients commit.

Published in Wealth Management

(New York)

A new survey by the Money Management Institute and AON has come up with some interesting findings as it relates to client satisfaction with their advisors. One of the most intriguing findings was that clients say they wished their advisors used more goals-based financial planning. Goals-based planning is the idea that you plan around clients’ individual life goals (e.g. saving enough money to pay for children’s college) and then continually report to clients how they are doing in those areas. Incorporating values into their financial planning is another area where clients say advisors could improve.


FINSUM: Many advisors already do this, but there is likely room for improvement, especially as it relates to reporting. Very few invest and save just for the sake of accumulation without a plan for their money, so reporting on the key areas they are making progress towards is a good step. There are even funds that specialize in helping aid goals-based investing.

Published in Wealth Management

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