Planning With Purpose

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November 14, 2016

Goals Based Wealth Management
can help investors tie financial decisions to personal and family objectives.

For many investors, building a financial portfolio can feel like an abstract process. Without a concrete plan for what they want to do with returns or an understanding of when they will need to access funds, investors can find it difficult to understand their true appetite for risk — or whether their investments are meeting their needs.

To close this gap, many investors are embracing Goals Based Wealth Management, an investment philosophy that links wealth and financial decisions to specific life goals. “Individuals and families have a lot of aspirations for their lives, and their finances play a critical role in determining whether they achieve them,” says Jason Stamm, Central Region President of The Private Client Reserve of U.S. Bank in Minneapolis.

Goals Based Wealth Management makes the investment process more meaningful for clients because it links their investment decisions to what matters to them personally, says Amy Kane, Senior Wealth Planner for The Private Client Reserve in Denver. “They are not setting arbitrary dollar amounts. They are making plans to support their passions.”

Pick a Card

Wealth planners begin the Goals Based Wealth Management investment process by scheduling a discussion and then giving clients a deck of 10 cards categorized under three types of goals:

1. Lifestyle — how to live and fund daily life

 2. Family — how to provide for an extended family

 3. Impact — how to impact the community and the world


There are also three blank cards that give clients the opportunity to write their own unique goals tailored specifically to them.


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Stamm explains that when he works with couples, he gives each partner a deck and invites them to choose, together, their top four or five life goals. Once those goals are selected, they are used as a framework for building a strategic wealth plan. Then, each individual is asked to lay out his or her own choices for goals. If the choices differ from one another, they’re asked to start to work together to determine what they think is most important to their family.

“The cards are meant to spur a discussion about how clients’ values, beliefs, goals and priorities should influence their investment strategy,” Stamm says.

Once they narrow their choices, couples have the option of creating a goal-funding matrix, which gives them an opportunity to assign dollar amounts and time frames to each objective.

“It’s a very meaningful experience, which brings people closer together,” Stamm says. “I’ve had clients shed a few tears as they work through this process.” 


After goals are defined, a wealth advisor gathers data about a couple’s current wealth, debts and future expectations, and this information is used to define specific timelines and dollar amounts that

can be assigned to each goal. Kane explains that when goals are classified this way, clients and advisors can more succinctly assess the appropriate level of risk for each set of goals and, therefore, make better investment decisions. For example, investments to support short-term critical goals, such as a child’s education, likely will benefit from a more conservative strategy. On the other hand, long-term aspirational goals, such as building a second home, might benefit from more aggressive investment strategies.

“We don’t tell them what to do,” Kane says. “We ask them what they want, and then we build a road map to help them get there.”

Along with serving as a more strategic approach to investing, Goals Based Wealth Management can make new investors more comfortable with the decision-making experience because it helps to provide tangible results, Kane says.


For example, she is currently working with a couple who want to sell their business but are unsure about what to do with the money after the business is sold. By going through the Goals Based Wealth Management process, this couple can identify the life goals that matter most to them — in this case, their goals include taking a few years off to spend time with their teenagers — and then make investment decisions to help enable their plan.

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“Once they started to envision their goals, they became excited about how this sale would help them fulfill their dreams,” Kane says. It also gave them a level of confidence and comfort that they didn’t have going in. “Now, they know their assets are targeted to support them.”


Making an Impact


Along with setting goals and timelines, wealth managers will also help clients understand the tax implications for each investment path in order to prioritize the distribution of assets based on when and who ultimately will benefit, says John Campbell, Senior Wealth Planner for The Private Client Reserve in Chicago. “It’s all about mitigating risks over time.”


Campbell is currently working with a couple, both doctors, who have three children, including one who is disabled. Following the principles of Goals Based Wealth Management, the couple defined goals regarding estate planning for their children, charitable giving and planning for their own retirement. A key component of the plan was ensuring that their disabled child will have the necessary resources for care long after the parents are gone, but — at the same time — still be in a position to benefit from state programs.


To meet that goal, Campbell helped the couple set up a trust that has the potential to provide ongoing benefits to the child without providing ownership of assets that might cause a disqualification from state aid. They also set aside part of their estate for a charitable foundation, which lessens their tax burden while providing benefit to a tax-exempt

organization. Finally, they invested in a life insurance policy to “reseed their estate” to support their other children.


By focusing on their end goals, our clients were able to make choices that would create potential financial benefit for them, their children and the community in the most cost-efficient way possible, Campbell says. “They were able to make more informed decisions.”


A Living, Breathing Document

Goals Based Wealth Management isn’t just about the upfront investment process. Following this philosophy also changes the way investors track their investments over time.

“Investors measure their progress against their own goals. They do not simply track their performance against the S&P 500,” Stamm says. This can provide clients with a better sense of how their portfolio is doing and a better assessment of whether they are on track to meet their goals. Based on regular reviews, a client and wealth planner will update the client’s plan and rebalance asset allocations as needed to stay on track. According to Stamm, “This is a more dynamic and personalized way to build and maintain wealth.”

Clients who are interested in pursuing a Goals Based Wealth Management approach should contact their Wealth Management Advisor. The aim is to connect finances to goals and objectives, help people define what they want to accomplish in their lives and determine how their investment portfolio can help them get there.

“The impact of these decisions can last a client’s lifetime,” Stamm says.

Financial Planning