Are the “goals” of financial planning helpful or harmful?

In an effort to inspire clients and potential clients to take action on financial planning, we see an endless stream of advertisements featuring exotic golf courses, beaches, sailboats and sea mammals. Words like “hopes”, “dreams” and “passions” are often invoked. And for the smaller subset of people in this world who regularly use these terms, such a reference might be useful.

But what about the rest of us?

In reality, many of these words fall on deaf ears due to a lack of resonance, as they sound a bit more sensational than the reality we are chasing. Even common phrases like “estate planning” and “wealth management” can seem distant to people with millions in assets, as they still don’t feel like the words “estate” and “wealth” fit together. really apply to them.

Heck, even some of the more common words referenced in financial planning, like “values” and “goals,” aren’t exactly everyday language for most. Could you imagine your crazy uncle whipping out a “mission statement” while getting a third serving of stuffing at your next Thanksgiving dinner?

Let’s be clear: there is nothing wrong with using any of these terms and expressions. Indeed, many of them are well applied in the practice of financial life planning. But we must recognize two things about the language of financial planning:

1) Different words will motivate different people differently.

2) Words are more a means than an end.

Because different words will motivate people differently, we should stick to our personal favorites. For example, a financial adviser may be a staunch “values” person, finding great personal motivation as a devotee of Stephen Covey, but his client may have a negative association with the word. If so, his efforts will almost certainly be better spent finding another source of rhetorical motivation, rather than attempting to retrain their association by insisting on “values-based financial planning.”

And it doesn’t even have to be a negative association – there might be NO association, even with a word that has become a staple of financial planning (if not a holy cow), like ” Goals”. Interestingly, this word seems to evoke a lot of passion from both its proponents and detractors in the field of financial planning.

Some consider goals to be THE goal of financial planning. And why not? We start by determining what is most important to someone (their values, if you will), we set goals that support those values, and we put plans in place to achieve those goals. So ! It is quite logical. But…

Others, however, argue that setting concrete goals, especially long-term ones, is inherently contested because life is so non-linear – who really knows where they’re going to be or what they’re going to want in In 5 or 10 years, even less in 20 or 30 years? They further argue that the inherently variable vehicles that are often used to achieve these goals, such as the stock market, make them far less accurate than they otherwise appear. The net effect, it is well argued, is that overemphasis on objectives may in fact be ofmotivating.

So where are we?

Perhaps the Solomonic wisdom here lies somewhere in the middle. Maybe goals work when they work, not when they don’t. And maybe they work best when applied as a means rather than an end.

But how is this possible? Well, when we have discerned someone’s motivation well, a tangible goal may help create some traction and set a positive trajectory.

Borrowing from Brendan Frazier borrowing from Greg McKeown, what we really need to motivate effectively is something that is both meaningful and measurable.

I would say we start and end with meaning. For example, many people want to have more peace of mind. Super meaningful, but totally unmeasurable, right? Through effective exploration, however, we learn that one particular individual sleeps better at night when he has $X.00 in his savings account. The goal of having $X.00 in savings therefore becomes the way to have peace of mind.

Another example: some—many, I believe, and especially those heading into the retirement phase of life—are motivated by the idea that they have enough. Enough is, of course, a ridiculously relative term. It’s a feeling, not a number. And no financial adviser on the planet can guarantee that anyone else will have certified enough money saved or invested or in the form of pensions or annuity income that they will have a 100% chance of surviving each of his expenses.

But with careful analysis, we can certainly provide a very favorable (or unfavorable) opinion that you can pull in $Y.00 per month and probably sustain that stream of income with periodic inflationary increases over your lifetime. The monthly income figure is the goal – the means – but that glorious sense of satisfaction is the end.

Finally, let’s remember that as financial advisors, we should not stick too much to ANY of OUR favorite financial advice. It is truly the CLIENT’s words that matter and will do the best job of motivating them. Therefore, whenever possible, we must stick to our proprietary vernacular and use the words that will most motivate our customers – theirs.