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How do personal goals and objectives affect an investment strategy? And how can we define them clearly? To explore this topic further, we spoke to Daniel Glückler, Wealth Advisor at Alpian, and discovered an effective framework to define financial goals. And life goals.  

Hi Daniel! Why is it essential to understand a client’s goals and objectives as a wealth advisor? 

Well, the essential role of an investment strategy is to balance returns, risk, and liquidity. If we think of systematic capital investment, the aim is to invest in securities that offer high returns, low risk, and high liquidity. But, as you may know, higher interest rates come with greater price fluctuations and lower liquidity. You also need to think of taxes and costs. So, it can be hard to see a way forward when you’re trying to balance different objectives that don’t complement each other. 

So, where do the client’s goals fit into this? 

To obtain the best possible investment strategy – one that’s perfectly tailored to our client – we must first understand the client’s financial profile, which includes their risk capacity and tolerance and their overall financial behavior. But we incorporate the client’s life goal or goals because they determine how, when and how long their money needs to stay invested to generate an amount that matches their goals. 

Do prospective clients always come in with very clear long-term goals? 

Not always. However, it is hard to find people that want money just for the sake of having money. There’s almost always something they want to accomplish with it. At Alpian, we call it wealth beyond money. 

Some people come in with very clear goals in life, others have a hazy picture of the future. But everyone has an aspiration they’re trying to reach. Finding out more about that vision is a vital part of what we do. This objective, along with short-term goals are often linked and are considered together to formulate a suitable investment strategy. 

So, people can come in with short-term and long-term goals? 

Yes, of course! As I mentioned, both are linked and important to create the right strategy. Most people usually have clear and tangible short-term goals, often with a clear timeline in mind. For example, someone might need to pay off a 30k debt in 3 months. Or need 25k for their wedding by next April. This information helps us ensure that the money is available at the exact time they need it, and we would recommend a strategy that preserves their capital. 

How do you replicate this process for long-term life goals? 

It’s not that simple because life goals are harder to set for many reasons. Lack of general clarity, and also because certain goals are hard to set timelines for and many unknowable future events can change things. So, the way to approach them is to communicate regularly and stay informed about what’s happening in our client’s life. This allows us to monitor the investment strategy and assess its relevance.  

But since the client is interested in the long-term, we can begin by defining strategies with higher volatility with the expectation of a higher return. We can also choose a fundamental portfolio trend and maintain the position during unusual market fluctuations. 

If we look at the lifecycle of most people, we see that there are certain phases of life with different activities and objectives.

Is there an easy way to define long-term goals?  

Even though people have individual wealth ideas and goals, some milestones are common to many of our lifecycles. These can be used as a framework to define long-term goals. 

Could you expand on this framework? 

Sure! If we look at the lifecycle of most people, we see that there are certain phases of life with different activities and objectives. Let’s imagine we have a young client in her mid-20s called Julia. At this stage of Julia’s life, perhaps her career is taking off and she is planning to buy a car or go abroad for further studies.  

In the next stage, in her early to mid-30s, her career is perhaps still going strong, and we can assume she is earning more. What will her priorities be now? Probably not the same as in her 20s. Now she might be focused on financing a bigger home for her family or saving more money.   

The same thinking can be applied to the later stages of life as well. Towards the end of her career, Julia might be thinking more about financing her retirement or changing her lifestyle. And after retirement, her priorities may be exploring the world.

So, it’s a framework to set goals by the phase of life you’re in? 

Exactly. Just like Julia, every client will have different priorities or challenges based on individual circumstances and the phase of life they’re in. The framework allows you to think about these goals in a structured way and factor in events that could be influential at each stage – for example, having a child, getting promoted, or receiving an inheritance. This enables clients to think of the strategy and rules to ensure that they reach their goals. 

That’s a helpful tool! What should customers consider while setting these goals? 

I would sincerely urge anyone trying to define their wealth goals to ask themselves these questions: 

  • Which phase of life am I in? 
  • What are my goals right now? 
  • Which goals are more important than others?  
  • Which of my goals requires financial planning? 
  • When do I want to reach each goal? 
  • How much money do I need to reach each goal? 

The answers to these questions are like a compass that can point people in the right direction.  

Thank you, Daniel! 

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About the author

Driven by a need for clarity and simplicity on all things wealth related, the i-vest team works closely with senior financial experts and advisors to dive deeper into the world of finance, investment and wealth to make it more relevant for you.

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