How To Approach Financial Goal Setting with Your Clients

One Unavoidable Problem with Goal Setting

Not long ago, United Capital CEO Joe Duran wrote a post about the problem with goals. His point, however, was not to discourage advisors from helping clients set financial goals, but to point out some of the pitfalls in the traditional, rigid process of goal-setting based solely on numbers.

Duran pointed out three major flaws in goal-based financial planning:

1. Every plan ever written is wrong...because no amount of mathematical modeling can accurately predict the future.
2. Goals will change...because so much happens in life, positive and negative, that changes the course of our lives.
3. Life is unpredictable...as we all know. Our life events are unpredictable, the global economic and political climate is unpredictable, the behavior of the markets is unpredictable.

So, given these consistent flaws in goal-based planning, is it even worth doing?

We believe so! Planning will still make a significant difference in clients’ futures. A study published in the Journal of Financial Planning found that clients with a comprehensive plan may save up to 50% more than those without.

Duran suggests fully embracing the flaws in goal-based planning. He recommends focusing, not on an overly detailed, falsely precise plan for meeting set-in-stone objectives, but on teaching and helping clients make good financial decisions, whatever happens in their lives.

Focus on Making Good Choices

When you sit down with a client to begin the planning process, both of you should consider three goals:

1. To understand what kind of life your client wants to live
2. To help them have the resources to live that life
3. To find ways to help them thrive through life’s surprises

The Goldman PFM digital discovery process can help your clients gain an understanding of what’s important to them. What you learn together can help you create an individualized financial plan that can adapt to the realities of life.

Three Steps to Helping Your Clients Live Richly

Step One. The first step in helping clients make good choices about money is discovering what money really means to them. Is it primarily a way to enjoy life, to protect themselves from pain, or to take care of the ones they love? Intentions and values can be more permanent than goals. They can have a lifelong effect on the choices and trade-offs that will be most comfortable and beneficial to your clients.

Once you know more about how your clients relate to money, you can:

• Understand their strengths and challenges with finances.
• Analyze their spending, saving, and planning tendencies.
• Discuss how to overcome any challenges they may face in following a financial plan.

Step Two. Once you gain clarity on your clients’ financial intentions and values, you can work with them to create customized financial plans. First, see where they are in relationship to goals they have already identified. Help them evaluate these goals, add additional suggestions and prioritize their objectives. Discuss the trade-offs they may need to make. Provide your clients with a clear, easy-to-understand Priority Action List. Finally, help design an investment portfolio to help them achieve the life they want.

Step Three. Deepen the relationship by keeping it proactive. Remember that assumptions may be wrong and goals are likely to change. Update, measure, and track plan progress as changes occur. Understanding your clients’ attitude toward money and behavioral challenges will give you a substantial advantage in helping them make choices that are right for them.

You can make a significant difference in helping your clients Live Richly^SM if you begin by understanding much more about them than their ages and income. At United Capital, our approach to financial management begins with in-depth understanding. We partner with forward-thinking financial advisors who are planning-centric and devoted to helping their clients live the life they want.