Why goal-based financial planning matters

Financial advice is about more than just accumulating wealth. A goal-based approach could help you create a plan that fulfils all your aims and aspirations and improves your overall wellbeing.

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Financial advice is about more than just wealth accumulation. Each person’s objectives can be complex, possibly extend over long periods of time and require bespoke support.

Goal-based financial advice can be targeted towards your personal aims and aspirations. This can lead to a more focused approach to money management and to improved personal wellbeing.

Goal-based planning, as the name suggests, aims to deliver specific financial goals over time rather than simply building up wealth. This more holistic approach to your financial journey requires you and an adviser to consider your circumstances and set out what you want to achieve now and in the future.

A financial plan can combine both short and long-term goals. For example, you may want to take a dream holiday or buy a favourite car next year but also enjoy a comfortable retirement long into the future. An adviser can deliver a tailored financial plan that aims to include all your desired outcomes, while considering your unique circumstances and attitude to taking risk.

How does goal-based financial planning work?

Goal-based financial planning requires you to be as specific as possible about your circumstances, goals and other needs. This allows your adviser to set out the most appropriate pathway for you, making you aware of any potential risks along the way.

Plotting a timeline that works towards achieving your goals can help you visualise your financial future. For example, you may wish to buy a bigger property. But, rather than solely focusing on the eventual purchase, your adviser would suggest key milestones along the way. Regular consultations can help assess progress and keep the goal of the property purchase in mind. They can also highlight any necessary adjustments, such as changing how you invest or how much you save, as well as any changes in market conditions.

Adopting a flexible approach and maintaining regular dialogue with your adviser can be vital. Realistic goals may be set from the start, but personal circumstances can change rapidly and these may prompt revised targets. Retaining flexibility can help manage change and ensure your financial plan remains in line with your current goals.

Pros and cons

There are, however, drawbacks to this approach. Goal-based financial planning can, for example, encourage rigidity, leading people to adopt tunnel vision. Quite simply, if you are too committed to an agreed plan, you may become overly focused on the distant horizon and overlook short-term needs or changes in circumstances.

This is where regular consultations could really bear fruit. A financial adviser can frequently review your plan and personal situation. Life events such as marriage, job loss or supporting children through university would be factored in, with the plan tweaked as necessary. Indeed the timeline for your financial journey may need to be adapted to cater for such developments.

Maintaining an open and honest dialogue with your adviser is crucial to this process. At Lloyds Wealth, one of our key principles is to hold regular reviews with an adviser. This can help ensure your finances remain aligned with your goals, adapt to changing circumstances and, hopefully, improve your overall wellbeing.

Important information

This article is for information purposes only. It is not intended as investment advice.

Fees and charges apply.

The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.

In preparing this article we have used third party sources which we believe to be true and accurate as at the date of writing but can give no assurances or warranty regarding the accuracy, currency or applicability of any of the contents in relation to specific situations and particular circumstances.

Any views expressed are our in-house views at the time of publishing. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

Last Updated on 17th April 2024

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