Being cast adrift in choppy seas is not an appealing situation. But that’s just what your clients face when they drift from one financial hazard to the next, with no clear destination in mind. The alternative is the win-win of a goals-based investment planning approach.

According to Chad Smith, a wealth management strategist at HD Vest Financial Services, there are a number of benefits to bringing a disciplined approach to helping your clients establish firm long-term goals, and then working methodically toward addressing them:

  • Having concrete goals, both in terms of dollar accumulation amounts and the purposes to which that money will be applied, creates a helpful reference point during times of market volatility.
  • When clients have set their own goals, you can more easily apply the principles of behavioral finance to help clients succeed.
  • With concrete goals in place, you have a consistent framework for client engagement; meetings and other forms of interaction have a standard basic agenda.
  • You are delivering more value to your clients than you would if you are just delivering commodity-like services. This gives you a competitive leg up on the proliferating army of algorithm-based cut-rate “robo” investing services.
  • Clients become much more satisfied with spending time with you.

Deeper conversations

A goals-based investment planning approach creates conversations beyond just investment selection, e.g., “Should we go with Mutual Fund X or Y?” Most tax professionals who also provide investment services already have that kind of conversation with that clients; it will not distinguish you from the competition.

Also, with a goals-based approach, you are telling clients, in effect, that you want to help them judge both their own performance, and yours. That’s because you are establishing a personal benchmark against which your clients can evaluate progress.

Goals-based investment planning gives you a way to help clients see the reality of opportunity cost in financial decisions. Suppose, for example, a client tells you, “I really don’t like the ups and downs of the stock market. I only want stocks to represent a third of my retirement portfolio. Let’s split the other two thirds between bonds and money market funds.”

You can then respond with something like, “OK, you already told me your goal is to retire at age 65. Using that asset allocation, you’re probably pushing your retirement date back by 10 years. Which would you rather do?”

Similarly, if you discuss with clients all of their financial goals, such as passing on particular sums of money to specific children and charities, you create the opportunity to fine-tune investment planning based on the different time horizons involved.

Clients (or prospective ones) won’t come to you and announce, “I’d like to take a goals-based approach to my investment planning.” But when you organize your client relationships around that principle, it is the rare client who would prefer any other way of doing business.

Your unique qualification

As a tax professional, you are uniquely equipped to help clients address their goals, given the huge tax implications of varying investment strategies. By the same token, knowing clients’ financial goals helps you to be a better tax advisor. The synergy created by combining a sensitivity to tax issues and opportunities, with investment goal-setting and tactical decision-making, is powerful.

Also, offering both of those two service categories makes for deeper and therefore more durable client relationships, allowing you to spend more time helping clients and building your client base, and less time replacing those who have moved on.

HD Vest Financial Services® and its affiliates (collectively, “H.D. Vest, Inc.”) do not provide tax or accounting services. You should consult your tax professional regarding the tax implications of any investments.

The views and opinions presented in this article are those of Chad Smith and not of HD Vest Financial Services®or its subsidiaries.

HD Vest Financial Services® is the holding company for the group of companies providing financial services under the HD Vest name.

Securities offered through HD Vest Investment ServicesSM, Member SIPC, Advisory services offered through HD Vest Advisory ServicesSM, 6333 N. State Highway 161, Fourth Floor, Irving, TX 75038, 972-870-6000.

Asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment losses.