The purpose of any advice business is to help its clients to achieve what they want to achieve. So, why is talking about goals-based advice seen as being 'different' from what financial planners have always done?
We believe advisers are talking about goals-based advice more because it represents a paradigm shift in the industry away from selling products to focusing on each client's specific needs.
Client expectations are changing. Technology and interconnectivity mean clients have access to more information and choice than ever before. Clients are more demanding of advisers to deliver strategies and solutions that match their specific needs.
The potential impact of the goals-based advice approach to improve the outcomes for clients and financial advice businesses are significant.
This paper focuses on the advice side of helping clients achieve their goals and look at why taking a 'goals-based' approach is so vital for the future of any advice business. We have differentiated goals-based advice from goals-based investing, which is a separate topic.
The difference to traditional advice
Goals-based advice is an alternative to the traditional risk-profiling approach based on modern portfolio theory. Instead of starting with risk tolerance, goals-based advice focuses specifically on meeting clients' lifestyle objectives, including investment portfolios.
The first and most crucial task involves developing an understanding of all relevant client needs and issues in order to establish a suitable client-centric solution. Therefore, while understanding risk tolerances is a factor, the formation of goals is the starting point for developing strategies and portfolios.
The question for many advisers is how to implement goals-based advice.
Learn more about our Adviser Investment approach.
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This article first appeared on FS Advice here
