Goals-based planning: A ‘show me the money’ retirement tool

Advisers who want clients to make decisions that will lead them to a happy retirement should be using goals-based planning programs to get them there, a behavioral finance expert said.
The best goals-based planning techniques remind clients of the full range of possible goals during their retirement and then prompts them to prioritize each goal, Shlomo Benartzi, a professor at the Anderson School of Management of the University of California, Los Angeles, said at the Schwab Impact conference in Denver Wednesday.
Without having concrete reminders of all the possible aspects clients should think about for their retirement years, they are likely to miss important goals, he said. For instance, the No. 1 complaint of retirees is that they are lonely.
“They don’t realize that they’ll miss people,” and didn’t plan their retirement in a way that prioritizes social engagement, he said.
By having clients rank goals such as financial independence, social interaction, control, housing, leaving money to family, charitable giving, travel, health care, self-improvement and others, advisers can create a financial plan that funds these tradeoffs appropriately, Mr. Benartzi said.
“The best GPS on the planet will not help you if you don’t know where you’re going,” he told hundreds of investment advisers at a packed conference session.
Advisers also need to revisit the goals clients have chosen regularly to ensure that their picture of retirement hasn’t change, he said.
Software providers are increasingly aware of the importance of goals-based planning.
Drew DiMarino, head of sales for eMoney Advisor, said his firm’s new eMX system coming out next month will focus even more intently on goals-based planning.
“Everything ultimately with an adviser and a client starts with a goal. It starts with that initial discussion: ‘What are your goals; what do you want to do?’” Mr. DiMarino said in an interview at the Impact conference.
The new offering will allow advisers to have that conversation with clients within a goals-based planning program. The information is integrated with the firm’s cash-flow-based planning tool, he said.
“More than ever, it’s about ease of use and integration of systems,” Mr. DiMarino said.