Goals-Based Investing
Why goals-based planning is so powerful
Michelle Black
Solutions Portfolio Manager

Building portfolios that simply beat benchmarks isn’t what many clients want from their advisors. Clients are increasingly telling their advisors they want help creating holistic plans to reach their real-life goals. This is an important shift in thinking for advisors. Michelle Black, wealth advisory senior manager at Capital Group Private Client Services, discusses why clients are putting goals ahead of benchmarks and what that might mean for your practice.




Goals-based planning has become an industry buzzword in recent years, but there’s a reason for that. At the end of the day, what’s important is getting the clients to be able to use their money to meet their goals. Our job as advisors is investing their money in a way that uses those goals as really our guiding light. This is a natural evolution for our industry, and comes on the back of behavioral portfolios, which became popular after the financial crisis.

Goals-based planning has a lot of meanings, but basically this refers to wealth management — looking most holistically at accomplishing an investor’s goals, as opposed to how portfolios do in a vacuum relative to some benchmark. It requires using a different set of tools, but it’s also greatly impacted by an investor’s own behavior.

Some drivers that impact an investor’s outcomes are their ability to save, invest and spend wisely. It’s also driven by their risk capacity, their ability to take on risk, costs and taxes. It’s personal. It’s an analysis of a client’s goals in the context of their balance sheet.

In this framework, the ideal asset allocation maximizes the probability of meeting a client’s stated goal, minimizes the probability of shortfall and minimizes the cost of funding it, given their desired level of confidence and their time horizon.

Now, one side effect of this is that it keeps clients focused on what’s really important, as opposed to looking at how they’re doing again, relative to a benchmark. It helps to give them peace of mind and forces them to think about what’s really important for them.

For all of these reasons, I always highly encourage advisors, if they haven’t already done so, to incorporate the concepts of goals-based planning into their practice. It’s good business, and it’s also great for your clients.

Michelle Black is a solutions portfolio manager with 29 years of investment industry experience (as of 12/31/2023). She holds a bachelor’s in business administration from the University of Southern California. She also holds the Certified Investment Management Analyst® and Certified Private Wealth Advisor® designations, is a member of the Investments & Wealth Institute and serves on the CIMA commission.


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