The value of goals-based financial advice

Renato Mota, Group General Manager - Wealth Management

Renato Mota

Throughout the ages there have been people who feel as if they are moving from one financial hurdle to the next. Inevitably, these people, without a clear goal in mind, risk becoming disengaged in how they manage their financial assets. Evidence suggests that these types of people exist at all levels of financial net worth – and are likely to be your clients. Research has also shown that in the face of financial uncertainty (or the lack of a clear plan), focus turns to cost, not the value, of the advice you provide.

Demonstrating the true value of advice, however, is more important than ever. This is why more and more advisers are embracing ‘goals-based investing’ for their clients as they look for new approaches to delivering advice.

Meeting goals, meeting expectations

Goals-based investing, in itself, is not a new concept. Focusing on meeting the liability of a future lifestyle does however, in a sense, reverse the traditional advice model where simply maximising the value of an asset determines your clients’ lifestyle in retirement.

An advice strategy which focuses on helping clients set specific goals (and for subsequent meetings tracking progress against those goals), makes it easier for you to show – and your clients to understand – the value you bring.

This is supported by the findings of ourThe expectation of advice white paper. Our survey of over 300 clients showed 76 per cent rated ‘achieving core goals and lifestyle objectives’ as the definition of a successful ongoing financial planning experience.

Just 14 per cent said ‘better than average investment performance’.

Reframing the advice conversation around specific goals can positively impact your business, with clients who felt as though they were on track to achieving their goals and objectives almost three times more likely to refer over the next 12 months.

Greater client engagement

Part of the reason for increased referrals could be that, for many clients, tracking their investment against a tangible goal will strengthen their engagement with financial advice and provide greater motivation for saving than portfolio returns against a benchmark. Achieving a certain goal also builds confidence in the approach, which in turn reinforces the desire to maintain this approach.

Goals-based investing also addresses the fact that many of your clients’ goals happen at very different times and may require very different portfolios to achieve.

Goals-based investing – a new risk management approach

As a financial adviser, you would know only too well that clients, when it comes to investment decisions, can sometimes be their own worst enemy. All too often clients will sell out of investments at precisely the wrong time in response to a market downturn or volatility – regardless of how that investment is tracking towards a goal.

The ‘mental accounting’ nature of goals-based investing mitigates this behavioural risk by letting clients make separate investment decisions for each goal rather than in aggregate for their portfolio.

Further, how your client is tracking towards meeting a goal focuses on the amount of money your client actually has, rather than performance relative to a benchmark, and becomes a good reference point in times of volatility.

Longevity risk is also becoming increasingly relevant in financial advice. Goals-based investing allays this risk as it separates out goals across the different stages of retirement rather than drawing from the same pool of funds for their whole retirement.


Goals-based investing lets clients drive the investment decisions, encouraging them to stay engaged with their investments and look beyond the ups and downs of the traditional benchmark investment approach. For you, goals-based investing focuses on the more personal side of financial advice relationships and understanding more deeply what is truly important to your clients.

The information contained in this newsletter is provided on behalf of the IOOF group of companies and is intended for financial adviser use only. It is given in good faith and has been prepared based on information that is believed to be accurate and reliable at the time of publication. Any examples are for illustration purposes only and are based on the continuance of present laws and our interpretation of them at the time.