Goals-based advice is not a new phenomenon. Financial planners have been relating advice back to a client’s goals and objectives for many years. There are, however, two sides to this story. Consumers see it a little differently. Based on extensive research and outcomes of the Royal Commission, consumers feel in many cases, goals are closely linked to product sales and that financial planning is largely focused on products, not them.
The solution is to shift focus. We must anchor a client’s goals at the heart of the advice process, so let's unpack the multiple layers of goals-based advice.
Goals-based advice is a financial planning methodology that allows clients to save for multiple financial objectives across various time horizons... It helps to keep clients focused on working toward their goals (goal achievability), not chasing returns, and less reactive to market volatility.
There are three parts to GBA:
1. Goals discovery - the conversation that draws out the client’s goals, dreams, values, and aspirations.
2. Goals-based advice - is the technology & modelling that sits behind the customer advice experience. It helps advisers to explore their clients's goals, have what-if & trade-off discussions, and model advice strategies interactively in front of clients, improving their goal achievability as the key measure.
3. Goals-based investing - this is the “goal risk tolerance” methodology that allows individual or buckets of goals to have their own risk tolerance & investment asset allocation, rather than the traditional “one-size fits all” approach to investing.