How to Implement Goals-Based Financial Planning

Goals-based financial planning focuses on helping clients pursue specific life objectives such as buying a home, funding a child’s education or retiring at a certain age. Rather than anchoring advice to benchmarks or market performance, this approach aligns investment strategies with client-defined outcomes. Five of the 10 largest wealth managers in the world have adopted a goals-based planning approach, according to a 2024 Datos Insight report. ¹ Adopting a similar strategy could help you improve the client experience, increase retention rates and attract new prospects to your business. 

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Implementing a Goals-Based Financial Planning Approach

Building a goals-based plan is about working with the client to understand where they want to go financially, and how you can steer them there. While this can be complicated and the conversation may sound different for each client you serve, the following general steps can help you formulate a goals-based plan:

Discuss Lifetime Plans

First, sit down with your client and talk about their plans: What do they want to achieve? Or, to put it another way: What are they building wealth for?

This conversation is about more than just their immediate situation. It’s a big-picture conversation about what kind of life they want. For example, does your client anticipate children and college funds? Or, if they don’t yet own a home, would they like to? When do they plan on retiring? And what kind of lifestyle do they anticipate?

It may help to segment your client list to better understand the types of goals you’re most likely to encounter if you serve a wide range of investors. For instance, you might split your list into these groups:

• Younger investors (Gen Z)
• Peak earners (millennials)
• Midlife investors and near-retirees (Gen Xers)
• Retirees (Baby Boomers)

This separation can help you decide what questions to ask to gain the most useful insight for goals-based planning.

Set Financial Targets

Once you’ve helped clients clarify their goals, translate those plans into concrete financial projections. Estimate how much each major goal will cost to pursue.

For example, say that you work with a married couple in their mid-30s who would like to retire at age 55 with $2 million. They bring in a combined income of $225,000 per year but they’re carrying $50,000 in student loan debt, and they’re interested in buying a home. They have no kids now, but haven’t ruled them out in the future.

This is the step where you turn the client’s goals into the plan that will pay for those outcomes. Visualizer tools can be helpful for estimating potential investment outcomes. You can use these tools to run “if/then” scenarios to demonstrate what would happen if a client does X, Y or Z with their portfolio. Being able to show a client rather than just telling them can underscore the importance of having a cohesive plan.

Establish a Timeline

When implementing goals-based financial planning, time is an important factor. To reach their goals, your clients may need to complete specific action steps in a particular sequence and by a certain date. If you’re unsure what that might look like, the CFP Board’s seven-step financial planning process offers more detail on how to create realistic deadlines.

Going back to the previous example, let’s assume your couple is 20 years away from their desired retirement goal of 55. They have $200,000 saved combined across two 401(k) plans and two traditional IRAs. Using a retirement calculator, you estimate that they’ll need to invest approximately $2,230 per month and earn a 7% average annual return to meet their goal.

Knowing this information, you can work with your clients to determine annual funding deadlines for each of their retirement accounts. For example, if one spouse’s employer offers a more competitive 401(k) match than the other, you might set a goal of fully funding that account as early as possible in the year. Once that goal is met, the other spouse can increase their contributions to max out their plan before the end of the year. They’d then have until the tax filing deadline of the next year to fully fund their IRAs.

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Build an Investment Plan

A goals-based financial plan also requires an investment plan designed to fund each bucket.

For example, say that your clients plan to have a baby in the next year, and they want to start a college fund once the child is born. Your role is to explain the options and the investments available. For instance, you might offer a side-by-side comparison of 529 plans vs. Coverdell Education Savings Accounts. Or you may walk them through the potential pros and cons of Trump child savings accounts, which are designed to help kids fund their education and other goals.

With each one, you would discuss with the client the investment plan needed to reach their specified savings target by the time their child is ready for college. A 529 plan, for example, typically offers a range of mutual fund options, including age-based target funds. Trump accounts invest solely in low-cost, diversified U.S. equity index funds and exchange-traded funds (ETFs).

Based on your best judgment for market returns and their risk tolerance, consider which option is most appropriate for your clients. Then, consider how often you want to sit down with your clients and review their investment selections. An annual client review, for example, may be a great time to discuss this. This is a proactive way to help determine whether your client is on track with their goals, and if they’re not, to determine an actionable plan to help them course correct. 

Set Priorities and Make a Client Plan

This is the part where you discuss what’s possible and take a holistic view of your client’s finances. Consider, among many other issues, their income and assets, their risk tolerance, their dependents and safety nets, and many other individual issues. All of this will define their ability to fund investments and recover from losses, which informs what kinds of investments may be appropriate.

For example, a couple earning $75,000 per year with two children has a very different investor profile when compared with a childless individual making the same amount of money. The client with fewer expenses may be able to afford to invest more of their disposable income into the market.

Adjust elements of the deadline and investment plans as you go. If your client can afford more or less, you might want to change your assumptions about how they will fund their investments. Ideally, you can find a middle ground where you build a series of targets, deadlines and investments around a financial plan that your client can sustain.

But maybe that won’t be possible. Your plan is also about finding out what the client can actually afford, and setting priorities within that window. If your client can’t afford to fund realistic investments for all of their goals, part of the client plan is about managing that. Use this stage to set priorities, so that they begin funding the most important goals first while putting others on hold for later.

Think Long-Term

Your client’s life and finances will change over time, so it’s important that their investing changes with them. Unexpected life changes, such as a marriage or divorce, childbirth or death, could veer their plan into a new direction. There’s no way of knowing exactly what could happen; there’s only the opportunity to plan for those contingencies. Therein lies the entire point of an ongoing relationship.

Monitor your client’s portfolios and their progress, and revise the plan as conditions change. Sometimes, things will change with your client. Sometimes, portfolio returns will fluctuate. A lot can happen over time, so making a plan is just the very first step. 

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Goals-Based vs. Cash-Flow vs. Comprehensive

Goals-based financial planning is just one of many ways that you can approach your client’s portfolio. Two of the other most popular are cash flow and comprehensive financial plans.

Cash Flow Financial Planning

This type of planning is, essentially, about budgeting. You take a client’s income and financial position into account, and build a plan around maintaining their spending needs and lifestyle. This is a plan that helps make sure that your client can continue to live in security and comfort, one that emphasizes their day-to-day needs.

Comprehensive Financial Planning

Comprehensive planning takes a holistic approach to managing a client’s entire financial situation. This strategy encompasses goal setting, budgeting, investment planning, risk management, tax planning and estate planning to achieve long-term financial objectives. To set goals, you would assess a client’s complete financial picture and develop a detailed, integrated strategy that aligns all financial activities and resources to achieve these objectives over time.

Marketing Yourself as a Goals-Based Financial Planner

If you’d like to add goals-based planning as a service, consider how you’ll attract those types of clients. Your current book of business may be the first place you look.

For example, you may initiate conversations with clients you’ve identified who could benefit from a goals-based strategy. You can advise them that they’re under no obligation to consider this service, but you’d be happy to develop a sample financial plan that they can compare to their current plan.

You can also mention during the conversation that you’re expanding your practice to include more goals-based planning clients, should they know anyone who might benefit. This is a casual but direct way to ask clients for referrals, which is one of the best and most cost-effective marketing strategies to drive growth.

As you turn your attention to external marketing efforts, tailor your messaging to the types of prospects you hope to reach. Storyselling can be invaluable here if you’re sharing personal stories or case studies that reflect the pain points prospective clients struggle with most. Creating high-value lead magnet to go along with the stories you tell can help draw them in further and get them onto your email list, which is another opportunity to market to them directly.

A seminar, webinar or lunch-and-learn event can get you in closer proximity to prospects, either virtually or in person. Educational events like these afford a chance to build rapport and establish trust, while demonstrating additional value and showcasing your knowledge.

With any marketing approach, keep your ideal client front and center. If you’ve taken time to build target client profiles or buyer personas, you likely know prospects well enough to know what kind of marketing messages are most likely to resonate, and which channels you should be using to promote them.

Bottom Line

Goals-based financial planning is an approach to financial planning built around specific outcomes. It requires significant work with your client to understand their plans, so that you can build options to match. Remember that flexibility and adaptability are also required. Your client’s life can change in an instant, and as their trusted advisor, it’s your job to help them navigate those shifts as smoothly as possible.

Tips for Growing Your Advisory Business

• If you’re looking to add clients or AUM, consider investing in your marketing and lead generation strategies. SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
• You can also connect with potential clients via social media, digital ads and direct mail marketing, which can help you spread the word about your business.

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