August 26, 2015 4:21 pm

Modern wealth management…a goals-based investing approach

Historically, investors may have thought of wealth management simply as maximizing the growth of a portfolio over time. This is still a useful definition, but in recent years wealth managers have started to adopt a more holistic approach, understanding that individuals and families may have other goals well, and, further, that those goals are likely to change over time.

While a traditional approach to asset management might begin by constructing a risk-return profile and then building out a portfolio to conform to that profile, goals-based investing requires a deeper exploration of what investors ultimately want to achieve with their wealth. This approach recognizes what is intuitively obvious – money should not be viewed as existing in a vacuum; rather, it should be thought of as simply another tool for achieving a set of objectives. This is consistent with what is common practice in the institutional world, where investment objectives are generally established and measured against known future liabilities.

For financial advisors, a goals-based approach to wealth management can be an effective way to help their clients plan realistically for the future by providing a highly personalized set of performance metrics. Typically investors have similar goals – a comfortable retirement, getting their kids through college, buying a second home or traveling the world. For many, achieving those goals will require some kind of trade-off. These compromises are often non-financial in nature (the trip postponed or not taken, for example), but may nonetheless have a real impact on quality of life. Goals-based planning allows the investor, working with the advisor, to more fully understand this more subjective set of “lifestyle” metrics and to better appreciate the nature of the choices being made.

This more holistic approach has the potential to provide a smoother glidepath as investors move from one stage of life to another and the costs and benefits of a lifetime of balancing work and travel, free time and a bigger portfolio become more clear. Of course, this doesn’t mean that traditional return metrics are obsolete – clients will still want to know how they’re doing relative to the benchmarks – but it does provide a helpful perspective.

Over the last few years, we have seen more and more advisors moving towards a goals-based approach. Implementing these programs requires not just a commitment to fully understanding your clients, but a set of strategies designed to help them reach their objectives no matter their stage of life.

At Horizon, we are helping advisors transition to this goal based approach and have structured our products around the dynamic nature of meeting client’s goals and major phases of the wealth management spectrum – accumulation, protection, and spending.  Recognizing that risk tolerances shift over time, sometimes dramatically, we provide a number of popular solutions for downside protection and real retirement income.


This blog post was contributed by Eddie Rollins, senior managing director of marketing & sales at Horizon Investments, a sponsor of the 2015FolioDynamix client conference. This blog post is subject to FolioDynamix disclosures.