- Forming a complete picture of clients’ goals requires going beyond amount, time horizon and risk tolerance to add the fourth dimension, prioritization.
- Guiding clients, and their families, through conversations about goal prioritization changes the dynamic of the relationship and positions you to manage more of a clients’ assets.
- Discussions about goal setting and prioritization provide powerful opportunities to engage with clients’ spouses and younger generations, which can lead to higher client retention.
When helping clients set goals, financial advisors typically focus on only three dimensions: amount, time horizon and risk tolerance. While these factors are certainly meaningful, they don’t tell all you need to know in order to build portfolios that can enable clients to achieve their goals.
To complete the goal-setting picture, advisors need to bring in a fourth dimension: prioritization. Traditionally, advisors have lumped a client’s goals together and assumed that the client’s risk tolerance applies equally across all goals. This approach assumes that all goals carry equal importance to clients — a false assumption that can ultimately lead to disappointing results for clients and a diminished view, in their eyes, of their advisor’s competence.
As you look for ways to highlight the value that you provide clients, helping them prioritize their goals — not necessarily in terms of chronology, but in importance to their lives — can be a powerful tool. Guiding clients through the process of articulating their true feelings about the amount of “shortfall risk” they are willing to incur with their various goals, and the relative importance of each goal, helps clients think clearly about what they are looking to accomplish. This approach also positions you as a trusted advisor who understands your clients’ dreams and values.