Client Goals based on Client Information

Planned Goals

Planned goals will be those which are easiest to account for, in that clients will bring them up with their wealth management team, hopefully at the outset of a relationship. The following are some examples of planned goals:

Retirement: Maintaining the desired lifestyle after a career is a goal for most clients.

Specific purchases: These could include primary residence, second residence, vacation property, sports car, or other luxury items.

Education: Saving for a family member's education is another planned goal.

Family events: Weddings and other social events can be significant expenditures for clients.

Wealth transfer: When clients have a definite amount that they wish to transfer, this goal may need to be prioritized over other goals.

Philanthropy: Supporting charitable causes is a noteworthy goal.

Unplanned Goals

Unplanned goals will naturally be more difficult to account for, as they arise often with little warning. It behooves clients and managers to leave a margin of error in their plans, knowing that unplanned liquidity events such as the following may arise:

• Property repairs.
• Medical expenses.
• Legal liability.
• Fines/tax increases.

The Wealth Manager's Role

Assisting clients with their goals can often be an exercise in qualitative advice, as opposed to the highly quantitative nature of most of the finance industry (more of an art than a science perhaps). Clients may be unaware of their own goals, not properly quantifying their goals, misunderstanding goal priorities, or not acting per their stated goals and priorities. Furthermore, client reactiFons to help and advice may not be consistent either. At times client education and training can be a difficult task.

Question

Which of the following is most likely to interfere with the achievement of client goals:

1. Self-control biases.
2. Cognitive biases.
3. All of the above.

Solution

The correct answer is C.

Both answers can lead to potential failure of client goal achievement. Uncontrolled spending could be a consequence of self-control biases, while cognitive biases prevent a client from properly understanding and/or formulating goals to begin with.

Portfolio Construction: Learning Module 4: Overview of Private Wealth Management; Los 4(d) Identify and formulate client goals based on client information