The latest trend in wealth management focuses on investor goals

Andrew Ratcliffe, director of Private Client Holdings.

The winds of change blow regularly through the world of wealth management. It is an essential part of an industry dominated by economic trends and market performance. As a result, unsurprisingly, the advice traditionally given by financial advisors has been performance or risk based – or a combination of the two.

However in recent years we have seen a global shift away from this preoccupation with risk factors and a single-minded chasing of Alpha – we are seeing a move away from performance-based wealth management, towards a model which focuses on the goals of the client. This is according to Andrew Ratcliffe, director of Private Client Holdings, who says that this progression has been largely led by international investment research and management companies like Merrill Lynch, SEI as well as progressively-minded family offices.

“This new goals based approach prioritises what the investor actually wants to achieve with their investments and is not just a pie in the sky “I want to make as much money as possible” approach. We see a move to unpacking client-specific goals and understanding investor behaviors’. This shift empowers portfolio managers and wealth managers to determine clear goals for accumulating wealth and departs from the old method of using income and expense spreadsheets to now developing a personal strategy to meet clearly defined investor needs.”

Ratcliffe advises that this allows for a far more constructive, holistic approach to wealth management, not simply considering one area of wealth accumulation - for example - in the segregated portfolio arena, or for wealth protection in fiduciary or tax arena – but rather stepping back to look at the individual’s personal economics and ensuring that all aspects work together to support those personal goals – not prescribed financial advisor goals which may be more influenced by commission earnings.

“This new era of wealth management means that advisors need to discuss life events and market conditions with investors, review their personal concerns and goals, measure progress toward reaching these goals – and update the strategy should any details change. This presents a new challenge to advisors as they need to ensure investors remain committed to their goals and resulting strategies. The main concern should not be on short term performance but rather the probability of not achieving client goals,” says Ratcliffe, who concludes by saying that goals-based investing offers a powerful tool against factors that can undermine financial success such as market fear, uncertainty, human biases and preferences as it allows Wealth Managers to guide their clients towards investing according to their needs and goals in a way that looks past intermittent market volatility.