News, views and more

Goals Based Investing - Smart Financial Planning for Executives

Goals Based Investing - a smart way to invest

In these uncertain economic times, investors face the risk of downturns in the value of their investment portfolios. For executives, high-income earners and those with more extensive investment portfolios, the stakes are higher in dollar terms. For those who plan to retire in the next 10-15 years, the risks are more significant and imminent.

This article demonstrates that Goals Based Investing is a smarter way to mitigate the short to mid-term risks imposed by economic downturns.

Understanding Goals Based Advice

The use of Goals Based Advice has advanced in recent years as advisers have sought to adapt to growing client expectations. Today, more than ever, investors want to be well understood and to have investment and wealth-building solutions that are relevant to their unique needs.

Long-term wealth management is all about the future. It includes planning for future standards of living and realising aspirations. It can be about having the capacity to have a full and fun retirement or be able to provide support to your family. It can be about having the ability to fund philanthropic endeavours to support the charitable needs, arts or sports organisations that you believe in.

Therefore, Goals Based Advice places the management of financial affairs in a clear context. One that clearly states where you want to be and where that is relevant to today. The approach sets up a range of financial goals around growth, future income, and mitigating the risks associated with market downturns. The practice should lead to a method of investing that is aligned precisely with financial goals.

Well, that’s the theory.

In the vast majority of cases, Goals Based Advice does not continue through to Goals Based Investing. Nearly all financial advisers revert to portfolio allocations based on the risk tolerance of the investor. At the very least they might advise that a higher level of risk is required to meet the goal. Investments are managed passively and rely on long term historical average performance as the guide to future performance. The problem is that individuals don’t live in a world of averages.

Understanding Goals Based Investing

Goals Based Investment deploys a different approach that actively manages investments, taking into account economic conditions and the investor’s goals. Goals are set, such as the rate of growth, the need for cash-flow or income and the level of risk at various stages of time.

Goals Based Investing utilises a broader allocation of asset classes or the types of investments that work to diversify risk.

The entire process of Goals Based Investing is geared to the needs of individual investors. Portfolio management and performance is more readily understood because it is reported in the content of Goals. Furthermore, when changes occur, you know that a team of specialists are actively working on the problem rather than merely waiting for conditions to improve.

If you would like to know more about Goals Based Investing, you can download our free guide – “How to protect and grow your wealth in uncertain economic times” or contact WLM Financial today.

Find out more on our Financial Advice services click here.

New call-to-action
Make a comment

Wealth matters. Ask us how we can help you boost yours.