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The Value of Financial Goal Planning

| June 26, 2018

Working with a wealth management advisor means more than simply investing money. The most successful client/advisor relationships are founded on a set of well-defined financial goals that the client wants to achieve. Below I have listed a few examples of how discussing financial goals with your advisor will have a positive impact on the relationship and your investment outcome.


Match the investment strategy to a spending time period.

Identifying long-term goals will allow your advisor to design an investment strategy that matches the time period during which the money will be used. For example: if the goal is to fund a child’s college education, this creates a specific time horizon for the investment strategy, and helps your advisor select appropriate investments and account types to reach the goal.


Create long-term objectives for portfolio planning and management.

By tying investments to long-term goals, you and your advisor have a long-term outlook for an investment strategy. Instead of evaluating a portfolio based on recent performance, your advisor works with you to evaluate progress toward achieving a goal. This makes short-term performance somewhat irrelevant. Instead of focusing on yesterday’s volatility in the stock market, focusing on progress toward financial goals helps you think about the actual purpose of the investment. This creates an on-going relationship in which your advisor recommends changes to the extent that they keep you on track for achieving your long-term financial goals.


Reduce Anxiety.

Research suggests that setting goals seems to make people less anxious about holding risky investments. In one experiment, subjects participated in a series of 10 bets. Some were told to focus on the result of each individual gamble, while others were told to examine the end result after all 10 bets were completed. As a result, the mere suggestion that subjects focus only on the final outcome reduced their stress significantly compared to subjects who focused on each individual bet.

From this experiment, we learn that having a goal can reduce the stress associated with the inevitable volatility that comes with being invested in financial markets.


Create opportunities to discuss priorities.

All goals involve trade-offs. Determining your goals will then allow you and your advisor to decide which goals should take precedence over others. For example, saving more for retirement may mean saving less to buy a lake house, or for an extensive European tour. It may also impact the timing of a goal: if the European tour is very important and will occur three years from now, then you may be pushing back your retirement year.

Or, if your retirement goal is of the greatest importance to you, you may need to decide to live more modestly and take less expensive vacations.

One of the most important services an advisor provides to clients is to help them understand these trade-offs, which usually involve complex calculations of financial values over time.


The Bottom Line: clients are best served when their investment accounts are tied to the achievement of a goal. When clients take the time to articulate what’s most important to them, they are providing their advisors with vital information with which to create the most appropriate plan.

I thank you for the trust you place in me, and I strive to make your experience as positive as possible. As always, don’t hesitate to contact me with any questions you may have.