Often, investment advisors focus conversations solely on returns and risks. Topics like asset allocation, mutual funds versus ETFs, and other technical areas can become the main points of discussion. While what you are investing in is certainly important, many advisors tend to lose sight of why you are investing.

A more meaningful, more engaging conversation centers on the goals you are trying to achieve. Your goals may take the form of a dream vacation to Europe, hopes for your children, or plans for retirement. By assigning a concrete goal to your investment portfolio, you can make better informed investment and saving decisions.

 This method of investing is goal-based investing.

Defining Goal-Based Investing

 Investopedia defines goal-based investing as follows: “Goal-based investing (GBI) involves a wealth manager or investment firm’s clients measuring their progress towards the specific life goals such as saving for children’s education or building a retirement nest-egg, rather than focusing on generating the highest possible portfolio return or beating the market.”

Goal-based investing gives your investments a real-world context. Keeping your focus on an end goal can also strengthen your resolve to reach those goals.

A Different Conversation

All too often, we hear of clients who hand over money to investment advisors with very little involvement in how advisors invest their money. Goal-based investing frames the conversation in a way that gets the clients more involved in the process.

We always ask clients to articulate and define their goals for the money we help them invest. By estimating how much money a client may need and when they might need it, we can measure a client’s progress toward meeting each goal as we review investment performance. This lends itself to a relationship where our clients are more engaged and vested in the outcomes.

What Are Your Goals?

A goal is different than a wish. A goal should include an amount of money and a target date to accumulate that amount of money.

The desire to be able to fund your infant’s college education is a wish. Saying that you’d like to have $200,000 saved in 17 years to fund your infant’s college education is a goal.

With a defined goal, you can plan how much to save each year and how to invest this money to meet your goal.

Read more: Is There Still a Place for Active Investment Management?

Role of Technology

Technology can play an integral role when we discuss our clients’ goals with them. Probability-based simulations, for example, help us estimate how much a client will need in retirement, for their children’s’ education expenses and more.

Clients often express uncertainty about what they may need or want from their investment portfolio several years down the road. Technology helps here as well because it enables us to quickly model different scenarios, for example, how often the client will travel or buy a new car during retirement.

As with any investment process, the outcomes portrayed are not 100% guaranteed. For this reason we view goal-based investing as a continuous conversation to be had with clients so that we can help the client update their goals based off of their changing preferences.

Our Approach

Unlike some investment advisors, we don’t believe in a one-size-fits-all approach to investing. We want to get to know you and understand your unique financial goals through our investment advisory services. 

Questions that get to the root of why you are investing are an important part of our approach to working with clients. Questions like “When are your children heading to college?” and “How much would you like to travel in your retirement?” are the reason clients come to us. It’s not about beating an arbitrary benchmark; it’s about helping you achieve your desired outcomes.

Give us a call. We’d love to discuss your financial goals and help you develop a plan to reach them.