Managing Wealth Based on Your Goals

Goal-based wealth or investment management can be a powerful tool that helps align your investment strategy with your financial goals.?In its simplest form you are changing the definition of risk from volatility, the ups and downs of the markets or your investments, to the probability (likelihood) of achieving your specific goals.?

Let’s take a moment to explore why a goal-based approach may make sense.?The main reason for this approach is that each financial goal may be unique.?What that means is that each of your financial goals may have a different time horizon and target values for a successful outcome.?Also, you may have financial goals that are directly related to principal projection or safety, maintaining a specific standard of living, as well as aspirational.?Due to these differences it’s unlikely an overall investment objective, overarching allocation, or risk profile is appropriate as those should be unique to each of the stated goals.

Let’s dive into how a goals-based wealth management approach would work:

1.??????Define Your Goals: In this instance a goal is a specific financial outcome you’re trying to achieve over some timeframe.?This could be anything from I want to have $100,000 saved into my child’s 529 plan by the time they go to college, I need to have $750,000 in investments to retire comfortably in fifteen years, or I want to leave $50,000 to charity as a legacy.?The more specific you are with your goals and their time frames the easier it will be to develop the initial plan.

2.??????Prioritize & Evaluate: Once your goals have been defined you want to rank order from highest to lowest importance.?After you’ve prioritized this initial set of goals you want to evaluate where you stand relative to each goal.?This part of the process will take into consideration what accounts or resources, savings and investments, you have already allocated to reach that specific goal and what additional resources, percentage of income, may need to be allocated to get the outcome you desire under certain assumptions.?

3.??????Design and Implement: With a clear understanding of your goals and current resources you can begin to develop the investment strategy.?This step involves determining the types of investments that may make sense for each goal.?For example, if your goal is short-term or specific to safety asset in nature (such as an emergency fund), then money market and short-term treasuries could make sense.?However, if your goal is long-term and aspirational in nature where high levels of volatility can be accepted, then allocations to public equities and private investments may make sense as they offer the potential for higher returns.?Once the appropriate investment strategy has been determined for each goal, implement.

4.??????Monitor & Revise: Following implementation, you want to monitor and track progress towards your goals.?Regularly reviewing the probability of reaching each goal and adjusting the investment strategies as appropriate will help keep you focused and disciplined in getting your desired outcomes.?Also, over time it is expected that you will achieve some of your desired outcomes or that your priorities may change due to life events.?These offer opportune times to define new goals, re-evaluate existing goals, reallocate resources, and revise the investment strategies.?It shouldn’t shock anyone to realize that goals can and do change over time and the strategy for meeting your goals will need to evolve with those changes.

Overall, goals-based wealth and investment management helps you achieve the desired financial outcomes for you and your family by developing a disciplined approach that works to reduce the probability of not meeting your goals.?Whether the goal is short, intermediate, or long-term or focused on safety, living standards, or aspirational in nature it is really a focus on what you want to achieve.

Whether short, intermediate, or long-term or focused on safety, living standards, or aspirational in nature– the goal is really a focus on what you want to achieve.

Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC, Member FINRA/SIPC.