From the rapid growth of goals-based financial planning software like MoneyGuidePro, to the recent announcement that even legendary wirehouse Merrill Lynch will be focusing on a goals-based planning approach, financial planning is on the rise, and is increasingly focusing around an approach of identifying and understanding client goals, and then crafting a plan to help the client succeed in achieving them.
Yet at the same time, the reality is that in practice the goals-based approach doesn’t always go as smoothly as hoped. Some clients haven’t crafted their goals yet in the first place, while others have goals that are wildly unrealistic and force planners to be the bearers of bad news. Often the goals-based planning process can get mired down in countless iterations of alternative “what if” plans, culminating in a giant physical tome that clients aren’t committed to and is never read again after being presented away.
But perhaps the fundamental problem with goals-based planning is simply that it puts the cart before the horse; clients shouldn’t be selecting the goals to pursue until they understand what the possibilities are in the first place! Which means in turn, perhaps the best thing that can be done with financial planning software is not use it as an analytical tool to craft a plan to achieve hypothetical goals that may or may not even be realistic, but instead to use the software interactive with clients to explore the possibilities of multiple scenarios and understand the trade-offs just to arrive at what the goals should be in the first place. Once the possibilities have been selected, realistic goals can be chosen, and then a more productive series of financial planning recommendations can be delivered for implementation!