- Behavioral finance has demonstrated that goals-based planning aligns better with the way clients think about their money and can help them better guide their investment decisions.
- Goals-based planning helps illustrate the areas where you provide the most value to clients and strengthens client relationships.
- Having clients classify their goals as essentials, enhancers or endowments helps them prioritize their goals and allows them to play an integral part in defining how they will measure their investment success.
- Implementing true goals-based planning should involve changing how you construct and manage portfolios, as well as how you communicate with clients.
In recent years, goals-based planning (GBP) has been much discussed in the wealth management industry. In fact, it has almost reached “buzz-word” status in some circles. This is largely a result of investors’ shifting needs and expectations. More and more baby boomers are retiring and focusing on sustaining their portfolio in the distribution phase, and their needs are different from those in the accumulation phase looking to grow their assets. Clients are becoming more demanding and want to understand the value of the advice they receive. This shifts the focus of discussions to client outcomes rather than benchmarks.