Goals-Based Investing - Aspiriant

Goals-Based Investing for Women

Last summer, I helped a client plan for an early retirement from a fruitful, but stressful and demanding, career. In addition to the portfolios we managed, I advised on the investments in a collection of employer retirement accounts, along with a large amount of deferred compensation. Of course, no one could have predicted COVID-19 and the economic uncertainties that came with it. So naturally my client reached out to me with concern at every gyration in the stock market.

Once I assured her that we had stress-tested her financial plan for environments such as this and her income stream was intact — that nothing had changed about her plans to start a business with her son this year and travel more — she was so relieved!

Our client’s reaction is typical because many people equate success with portfolio growth. However, when I speak with clients, knowing they can achieve their dreams is truly what’s most important to them.

Rather than play the game of “Whoever dies with the most wins,” a goals-based approach to wealth management connects an investor’s goals with how their portfolio is invested. I find that women particularly gravitate to this approach because it puts investment decisions in the context of what matters most in their lives.

A goals-based process focuses on you and considers your time and other resources, in addition to your wealth, to make sure we create a comprehensive plan that works for you and that you’re taking the appropriate amount of investment risk to live that plan. It helps to:

  • Give meaning to your wealth, with tangible and personalized context
  • Make the investment process more understandable and more relatable
  • Reflect realistic needs for managing risk and generating return
  • Avoid regret by focusing away from short-term gains and losses
  • Motivate you to stick with a plan
  • Generate comfort that you are on the right track and yet reinforce that nothing is carved in stone — your investment strategy is as flexible as your life is

A wonderful benefit is the many conversations that unfold. We explore different outcomes with uncontrollable factors that may impact the success of your preferred scenario. Thinking through potential roadblocks during a non-crisis moment and how you might respond may lead us in some new directions. Maybe we create a Plan B, or even a Plan C.

4 steps to goals-based investing

A goals-based approach considers where you currently are in your financial journey and where you ultimately want to go and identifies milestones along the way. When we work with clients, we walk them through four steps:

  1. Understand

    Start by examining and prioritizing what’s most important to you. We recommend talking about it with family and friends to bring focus, context and clarity. Think about your goals in terms of four pillars: lifestyle, investments, family and philanthropy. This crucial part of the process is different for everybody. For some, it’s starting a family and setting up a comfortable household, building a business, or planning for retirement. For others, it’s a broader strategy that unites the family around shared values and mission, growing and protecting wealth across generations, and honoring the family heritage.

  2. Analyze

    Now that you’ve identified and prioritized your goals, it’s time to measure the investment risk you can take. Think about: When will you need the funds? How do you feel about market fluctuations? Do you follow the stock market closely and tend to lose sleep over big drops? What information do you need to feel in touch with what’s happening in the markets and how you are faring? You should feel comfortable talking with your wealth manager about investment risk — how you think about it, how much you should take to meet your goals, and what that looks like in your investment portfolio.

  3. Plan

    Your wealth manager should then combine your goals and analysis into a personalized financial plan. This plan should include a diversified and efficient investment portfolio designed to meet your specific goals. But it may also include estate planning, education planning and tax planning. And it should make sense, be transparent and be easy to understand. Most of all, it should put your interests first. Don’t be afraid to ask questions.

  4. Refine

    Over time, as your financial situation and goals change, your plan should evolve too. That can happen suddenly with unexpected life events, or it can be gradual as you move from building up assets to spending down. Stay focused on your financial time horizon, and don’t be afraid to make course corrections if necessary. Part of this process is thinking about how a change in your tax situation could impact your investments.

The right benchmark for success

Each of us invests for a reason. Sometimes this is obvious and sometimes it’s a discovery process. Whatever the path, understanding why you invest can be life changing. It creates a personal connection to your investments and firmly places you in the driver’s seat of a lifelong journey with your portfolio.

Your goals should dictate how your money should be invested, not the other way around. Especially in a volatile stock market, I get asked from time to time, “What’s your best investment idea?” And I’ll say, “It depends on what you want to do and where you want to go.” Perhaps not as satisfying as a hot stock tip, but it’s the truth. Goals-based wealth management helps you to make financial planning and investment decisions with intention and purpose — so that achieving your goals is your benchmark for success.

Learn more about women and wealth by reading Aspiriant’s white paper, “Women Taking Charge: Six steps to feel more financially secure.”