Whats is it ?
Goals-based investing is an approach which aims to help people meet their personal and lifestyle goals, whatever they may be, in a straightforward and simple way. It does this by placing people’s goals right at the centre of the advice process and aims to build investment products that do the same.
Some investors may have goals such as ensuring they have enough income to live off in retirement and ensuring their money grows so that they can afford to take regular holidays in retirement. Alternatively, they might like to do all of that and also leave some money for their children or grandchildren.
Just as you may have different bank accounts for different purposes such as a savings account or a holiday account, it makes sense that your clients may be invested in different investments aimed at meeting different goals.
Once your clients' goals are identified you can then look to investment solutions that are targeted at meeting those particular goals.
How does it benefit you?
A goals-based approach to investing is beneficial to investors because it puts them in the driver’s seat as they are actively involved in the decision making process. The success of a goals-based strategy is not about outperforming benchmarks or competitors. Success is measured by how well an investor’s portfolio is tracking against a stated goal. It’s about being more relevant to investors and their needs, not only in terms of product design but in terms of communications and reporting.
By focusing on how an investment is on track to meet investors’ needs, it should help investors fight the urge to respond inappropriately and irrationally when markets aren’t performing as they might expect.
Approach
How is it different?
The goals-based approach represents a real shift in the way financial advice is given and the way investment solutions are designed, turning the traditional approach on its head.
Typical goals and risks
What are people's goals?
Throughout their lives, your clients will have many different lifestyle and financial goals that they would like to achieve and in retirement there are specific risks that need to be mitigated to help reach those goals.
Bucketing your goals
The three broad categories
Although people may have very different goals depending on what life stage they are at, their goals can be broadly categorised into essential needs, lifestyle wants and legacy aspirations.
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Important notes
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