How a Financial Advisor Can Help You With Goal-Based Investing

How a Financial Advisor Can Help You With Goal-Based Investing

Are you aware that investment strategy varies significantly among financial advisors – and not all are based on your personal goals? Investors in Libertyville, IL, and surrounding areas may be curious when they hear the term “goal-based investing,” or GBI. Isn’t most investing oriented around goals? Surprisingly, no. 

After assessing a client’s financial situation, financial advisors differ in how they help clients invest. It’s prevalent for financial advisors to benchmark their investment advice against metrics quite different than client goals, such as whether their advice beats the stock market averages in a given year or whether they minimize risk in line with or more than competitors.

GBI, on the other hand, focuses on your goals. A financial advisor who uses GBI will want to know your goals and the time frame to achieve them. This helps maximize the achievement of your goals. Your financial advisor will also likely want to know your priority for each goal.

Are you ready to discuss your life goals with a GBI financial advisor? Prism Planning Partners will help align your wealth with your dreams!

So how can a financial advisor help you with GBI within investment management? Here’s how.

1. Focus on goals

Many people go through life without precisely articulating their goals beyond a few (raise a family, buy a house). GBI requires you to express your goals in all areas of life. What do you want to do in retirement, for example? The goals of someone who wants to start a business and the goals of someone who wants to travel intensively in retirement may be quite different.

It also helps you to focus on specific goals, rather than just on (for example) saving enough money for retirement or a rainy day. 

There may be areas in which you’re not thinking about goals, too, and GBI can help you flesh those out. What are your goals in estate planning, for instance, or helping children and grandchildren through college? 

We may ask that you tell us a bit about your history with money.


2. Comprehensive financing planning in Illinois

Financial planners can help you with comprehensive financial planning. Comprehensive financial planning focuses on six areas:

  1. Budgets and cash flow – Reviews and analyses of your income and expenses can help make sure you’re financially healthy and hone in on how much disposable income you have to help you meet goals.
  2. Investments – Focuses on your non-retirement investments and savings, including savings for a cash cushion in case of emergencies.
  3. Retirement – Focuses on your savings for retirement, including when you plan to retire and what you plan to do.
  4. Educational savings – Helps you, your children, or your grandchildren plan financially for secondary school and college.
  5. Risk management – Focuses on managing risk, including life insurance if you have dependents and insurance for your assets (home, vehicles, other assets).
  6. Estate planning – Creation of wills or trusts for bequeathing your assets to loved ones or charity; inventory of your assets. 

We’ll ask about your knowledge of your financial situation, and your comfort level when it comes to taking certain risks.


3. Establishing time frames

GBI advisors generally divide all goals into three time frames: short term, medium term, and long term. The desire to have a lengthy European vacation next summer, for instance, may be a short-term goal (less than a year). Saving for a down payment on a second home may be a medium-term goal (three to seven years). Your retirement may be a long-term goal (more than seven years).

Establishing a time frame for your goal lets you focus on goal achievement. It can be beneficial, for example, to think of goal achievement when you look at the returns on your portfolio, rather than focusing only on percentages. You’ll be more able to take a long-term view of inevitable events, such as dips in the stock market.

It also establishes boundaries for the amount of risk and reward your portfolios should have. Money put toward a short-term goal, for instance, is likely to be suitable for cash accounts (savings accounts and certificates of deposits, CDs) because short-term declines in the stock market can negatively affect them. Cash accounts have minimal risk, and little reward as interest rates are currently at historic lows.

We’ll see how you and any other people involved make financial decisions.

But money saved toward your retirement, on the other hand, is likely to be split between stocks, bonds, cash, and perhaps alternative investments such as real estate. The stock market does carry some risk, as bear markets occur regularly. (A bear market declines 20% or more in the primary market averages such as the Dow Jones Industrial Average or Standard & Poor’s 500.) But it also carries more reward than bonds or cash. 

Over the past century, the major averages have appreciated 10% annually on average, including those bear markets. That’s far more than cash or bonds, whose interest is also at historically low levels. 

Most portfolios for retirement use stocks for appreciation because any declines are likely to be made up over the long term. They also weigh cash and bonds appropriately vis-à-vis your age. The closer you are to retirement, the more stable investments such as bonds and cash are likely to figure in your portfolio.


4. Managing your portfolios

Investments need to be actively managed for goal achievement. Portfolios should be rebalanced every year, for example. Rebalancing is a process by which your financial advisor reviews the ideal allocation, which is usually a percentage for each asset class and makes sure it remains at the ideal. 

In a year of strong stock market returns, for example, stocks can become more of a percentage than is warranted by your time frame. (And conversely, in a weak market, stock allocation can fall below the ideal.) Rebalancing fixes both.

GBI financial advisors can also make sure that portfolios are managed to maximize other areas of your financial life. Retirement portfolios and estate planning, for example, can be managed to maximize tax advantages, such as deductions. 


5. Discussing ongoing goals

Goals are not static. They change along with events in your life and with changes in your emotions, thoughts, and feelings. Outside events can also change your goals. The COVID-19 pandemic, for example, caused many people to reassess their goals, ranging from vacations and real estate to the timing of retirement.

We’ll gain a deep understanding of your time horizon, i.e., when do you want to stop working in your current occupation?

Family priorities are significant and serve as ongoing guide rails when managing a comprehensive. This is why clients are encouraged to review their plans regularly. 

A financial advisor can discuss your goals on an ongoing basis, ensuring you are on track to achieve them and realize the benefits of a stable and productive financial life.


When was the last time you talked about your financial goals? Let’s chat and see where there is room for improvement based on your time horizon!


Your life goals matter! Contact us today to discuss your goals in Libertyville and beyond.


Prism Planning Partners, LLC dba Prism Planning Partners is a Registered Investment Adviser. This article was produced by Paladin Digital Marketing, an entity unrelated to Prism Planning Partners and may not necessarily reflect the expertise of this financial advisor. This publication is not intended to provide investment advice and is intended for your information only. Opinions and forward-looking statements expressed are subject to change without notice. Information based upon third-party sources and data are believed to be accurate and reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All domestic and international rights are reserved. No part of this publication including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Prism Planning Partners. Neither Prism Planning Partners, nor its investment advisor representatives provide legal or tax advice. Please be advised to consult your investment advisor, attorney or tax professional before making any investment decisions.