What is Goals Based Advice?

Goals based advice quite simply links a client’s individual goals directly to the design of their portfolios, so the likelihood of achieving those goals is improved.

The traditional approach to building a portfolio is to use risk profiling to match a client’s investment risk tolerance to a Strategic Asset Allocation (SAA) benchmark, which by definition is more backwards-looking and static in nature.

Goals based advice is different. It seeks to look forward – using a more flexible portfolio design methodology and Dynamic Asset Allocation (DAA). The primary aim is to achieve a specific outcome or goal. It may be to achieve a real return objective (i.e. above cash or inflation) over a given time period. It may be to manage ‘risk’ within certain parameters. It may be to ensure that capital is available at a specific point in time by using liability matching or  Liability Driven Investing (LDI). Regardless of what the primary driver of a portfolio may be there is usually a strong focus on downside risk protection.

There are many ways to provide Goals Based Advice depending on everyone’s different circumstances.