Using a goals-based framework in financial planning resulted in an increase in client wealth of more than 15%,
according to the recent research by Morningstar Investment Management (http://morningstar.com/company/investor-success).
In addition, when financial plans focus on a client’s personal goals instead of arbitrary benchmarks,
it creates motivation and satisfaction. For these reasons, and because many investors appreciate the level of personalisation of goals-based financial planning, this approach is gaining popularity.
However, it’s success depends on investors really knowing their goals.At Olemera, we have always provided our clients with goals-based financial planning.
We also know that to achieve investment success, investors need clear investment goals that are both important to them and achievable, which enables the structuring of a solid plan for achievement.
How clear are you about your investment goals?
Research shows that there is a gap between the goals investors initially think they want and
the goals that are truly relevant and important to them.
In fact, the numbers from Morningstar research suggests that without proper guidance,
individuals often fail to identify as many as 50% of the goals they later recognise to be important to their plans!
This was demonstrated in research in which investors were asked to identify their top three investment goals, after which they were shown a carefully curated master list of common investment goals. After seeing this list, 26% of participants changed their top goal and 73% substituted at least one of their top three goals.
This is due to what is called a ‘thinking blind spot’ that stems from behavioural biases we all share.
These are significant barriers to successful financial planning because they can prevent investors from reporting their real or true goals, and that leads to financial plans that don’t accurately represent their preferences or motivations.
"If you don't know where you're going, any road will take you there." Lewis Carroll
Whether you would like to be certain you have selected the right investment goals,
or whether your goals may have shifted in these uncertain days, we would like to invite you to chat to us.
We would love to share with you the master list of investment goals and discuss with you whether it reveals priorities you may not have considered previously. As was the case with a third of the investors in the research, you may want to change a goal to make it more specific - for example, by changing ‘grow wealth’ for a goal that better encapsulates your motivations, such as ‘achieving financial security’.
Or, like others, you may want to change your goals to outcomes that revolve around emotional security,
such as ‘to feel secure about my finances now’.
We can help you identify the underlying intent of your initial goals, and help you redefine more precise detailed financial goals with clearly defined priorities.
Contact us and we will gladly share with you the master list of common investment goals and set a time to discuss your true financial goals with you.
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