Goals-Based Planning
Goals-Based Planning is a financial planning approach that organizes all strategies around specific client life goals rather than abstract metrics, measuring success by goal achievement rather than benchmark performance.
Exam Tip
Goals-Based = organize around CLIENT GOALS, not benchmarks. Prioritize: Needs > Wants > Wishes. Use SMART framework. Each goal can have different time horizon and risk tolerance.
What is Goals-Based Planning?
Organizes financial decisions around what clients want to achieve in life, not abstract benchmarks.
Traditional vs. Goals-Based
| Aspect | Traditional | Goals-Based |
|---|---|---|
| Focus | Asset accumulation | Goal achievement |
| Success Metric | Benchmark performance | Goals funded on time |
| Portfolio Structure | Single portfolio | Multiple goal portfolios |
| Risk Tolerance | Global assessment | Goal-specific |
Goal Prioritization
| Priority | Type | Example |
|---|---|---|
| Essential | Needs | Retirement income |
| Important | Wants | Home purchase |
| Aspirational | Wishes | Vacation home |
SMART Goals
- Specific
- Measurable
- Achievable
- Relevant
- Time-bound
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Related Terms
Financial Planning Process (7 Steps)
The Financial Planning Process is the CFP Board's official 7-step framework for delivering comprehensive financial advice, beginning with understanding client circumstances and progressing through goal identification, analysis, recommendation development, presentation, implementation, and ongoing monitoring.
Investment Policy Statement (IPS)
An Investment Policy Statement (IPS) is a formal document between an advisor and client that outlines investment objectives, risk tolerance, constraints, asset allocation guidelines, and the rules governing portfolio management decisions.
Time Horizon
Time Horizon is the expected period an investor plans to hold an investment before needing the funds, directly influencing asset allocation and risk tolerance, typically categorized as short-term (0-3 years), medium-term (3-10 years), or long-term (10+ years).
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