How to Uncover an Investor's Real Goals

Goals-based investing relies on a simple and powerful premise: identify what the investor truly seeks to accomplish and then use that knowledge to generate an appropriate portfolio and improve the investor’s peace of mind. In fact, there’s good reason to believe that focusing on an investor’s goals can both increase total returns and help motivate the investor for the long haul (Blanchett 2015; Locke et al. 1990).

But there’s a catch. It all depends on the goals. If the goals used in the planning process were meaningful and durable, great. But what if they weren’t? What if the goals that an investor reported to his or her advisor weren’t real? This can be a disconcerting prospect—both for advisors who explicitly conduct goals-based investing, as well as for those who incorporate that information as part of a more general investing process.