Can technology finally make goals-based advice a reality?

Before getting into the strategies, trade-offs, and probabilities that these decisions entail, a goals-based advice process supports clients in establishing what is genuinely crucial in their life.

The preliminary findings of the Quality of Guidance Review (QAR) point to a move toward controlling advise outcomes rather than methods. As it is explicitly built on the client’s goals, goals-based counsel exemplifies the proposed requirement to offer ‘great advise.’

While most advisers believe that a client’s goals should always be the starting point for advice, traditional technology has fallen behind. Many goal-based solutions have either been over-engineered and sophisticated, or have been overly straightforward to produce desirable results; striking the right balance is crucial.

Advisers must work around client goals within these technological limits. As a result, client goals are routinely modified to satisfy an existing risk profile, advisory strategies, and products.

Start with goals, not strategies

Goal-oriented advice can assist in revealing a client’s priorities and values. It’s a good method to begin a discussion because customers are frequently ignorant of what motivates their own actions. 

Unfortunately, it’s all too easy to rush into financial methods without a clear understanding of the goals that drive them.

Advice with a purpose aligns perfectly with advisers’ current best interests duty and related requirements — as well as the QAR’s proposed future need to provide ‘excellent advice’ by ensuring guidance satisfies a client’s objectives, financial circumstances, and needs. Goals are unique to each client and unrelated to products or investments.

However, even client reviews may overlook goals; they tend to focus on easily observable areas such as investment performance when they should examine whether a customer is on pace to meeting their goals. Strategies can be altered as needed by actively reviewing the latter.

More pressure to make a goals-based approach scalable

The rapid change in current market conditions has highlighted the importance of making a meaningful shift to goals-based advising rather than incorporating it intuitively into traditional advisory processes.

The fastest inflation rate in decades is pushing up cost of living pressures on customers. Official interest rates have sharply increased, raising the average mortgage’s monthly payment by hundreds of dollars.

Achieving common objectives like home ownership is becoming more difficult. More and more seniors are being compelled to spend their retirement savings to pay off their homes.

A goals-based advice technique can help clients determine whether their goals are still reachable and help them make the appropriate trade-offs. It can significantly improve the outcome of advice – just defining goals, according to research, boosts the chances of achieving them.

Tech to support goals-based advice and boost engagement

The relatively high cost of advice, which is partially driven by rules, has long been a source of concern. Without the correct technology, goal-based guidance takes time and can be costly.

However, progress is being made, with the government’s QAR emphasizing the importance of digital guidance in boosting innovation and improving accessibility.

Advisers are looking for technologies that will help them move with the changing regulatory environment and client expectations.

Tools are becoming increasingly available to make goal-based advising a basic aspect of the advise process, including:

• Engaging and effective for clients, yet simple to use for advisers.
• Separated from products and strategies.
• Encouraging clients to achieve their goals by helping them imagine and connect with their ‘future selves.’
• Demonstrating the value of advice to clients by changing their lifestyles.