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3 Reasons Why Goal-Based Planning is Here to Stay

adviceInvestors instinctively chase returns and benchmark-beating performance, particularly as they see equity markets reach new heights. However, client relationships that lead with narrow discussion of performance benchmarks risk dissatisfaction and miss a deeper new reality: more high-net-worth clients are self-aware of changes in their own risk tolerance, having found themselves unprepared for the market turbulence of 2008-9. The result is more demand, or at least receptivity, to prioritizing personal financial goal achievement ahead of outperforming benchmarks.

In response, many wealth management firms are transitioning from an accumulation-based value proposition to a goals-based approach oriented on mapping assets to specific financial goals. Among many reasons for this shift, three stand out for driving continued momentum toward an outcomes-based offering:

  1. Helps to prove the value of advice: Goals-based advisory conversations shift a low value-add discussion of short-term performance benchmarks to high value-add prioritization of longer-term goals and how to achieve them under various risk scenarios. Almost 70% of investors with a plan agree that their advisor helps them define their financial goals and objectives, 24 percentage points more than those without one.
  2. Builds trust and deepens relationships: Clients who engage in a personalized holistic planning process have a greater understanding of their goals as well as the rational for investment decisions, building confidence both for themselves and in their advisor. Nearly 90% of clients who have an excellent planning experience agree that their advisor suggests relevant products and services and about 60% increase assets or purchase additional products and services.
  3. Better protects clients from behavioral finance pitfalls: Clients who engage in planning have a better understanding of how portfolio allocations connect to goals, leading to fewer knee-jerk reactions to market fluctuations. Investors with a financial plan are 18 percentage points more likely to report that they are very satisfied with their advisor’s help in navigating the ups and downs of the market versus clients without one.

Learn how leading firms develop a high-quality financial experience (for CEB members), and preview how CEB Wealth plans to support you in strengthening your advice model.

 To learn more, visit CEB Wealth Management Leadership Council.

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