Liz Colfer, director at Five Wealth, discusses how the true role of financial planners is not focusing on investment returns, but helping clients set clear, meaningful objectives to drive financial success.
Many people think that financial planners spend all day harping on about investment returns, but this isn’t quite true. We do spend our days talking away, but not about investment performance and instead about objectives. We are always setting objectives, prioritising them, and then assessing progress towards achieving them.
But what actually is an objective, and why are they so important?
What is an objective?
An objective is defined as a goal or target that an individual or organisation aims to achieve within a certain timeframe. A good objective is defined as being SMART: specific, measurable, achievable, relevant and time-bound. Anyone with an annual performance review at work will be very familiar with the concept, but it’s not often people think about them in other contexts.
It sounds easy enough to come up with, but when asking a business owner to list out their life objectives we are often met with blank faces – it’s only when you drill down into different topics that the conversation comes alive, and colour is suddenly added to the financial plan. This could include things like career path, house moves, retirement, holidays, children, material purchases, and their legacy.
Why they matter
When building financial plans, knowing what you are aiming for can significantly influence your financial success. At a basic level, if you’re saving for no particular reason, it’s easy to see why there is less motivation to achieve a certain amount of savings each month. Whereas, knowing that a new car or house deposit is the goal you’ll be far more likely to get there.
This is no different to life planning, and whether you are an individual looking to manage your personal finances or a business aiming to optimise your financial strategy, establishing well-defined objectives is crucial. Some of the main benefits are:
- Provides direction and focus
Having specific aims in mind makes it easier to create a roadmap to achieve them. This focus helps prioritise financial decisions and allocate resources effectively.
- Enables measurement of progress
Knowing what you are striving for helps to measure your progress over time, track your achievements and make necessary adjustments to your planning. Ongoing assessment is a vital tool for staying on course and ensuring that you are getting closer to success.
- Facilitates better decision making
This becomes much more straightforward with clear, specific goals. You can consider different options when facing a few choices and model the impact these may have on your progress. This helps to avoid impulsive decisions that may have a detrimental impact on your plan.
- Encourages accountability
When you set financial objectives, you create a framework for accountability. This can be a powerful motivator, pushing you to stay disciplined and committed. This accountability doesn’t have to take the style of an army major, we like to think we’re much more carrot than stick.
- Helps you adapt to changing circumstances
Life is unpredictable and circumstances change, so having clear goals helps you to assess, prioritise and adapt these by way of a response. It could be that something which was more of an ‘added bonus’ kind of objective gets bumped up due to a higher figure being offered for the business than expected, or it could be that retirement age needs to be pushed out slightly due to changing to a lower paid, but more enjoyable, job role.
How can financial planners help?
Financial planners are experts in this field and can provide the experience and peace of mind for you to focus more on enjoying the holidays than worrying about saving for them. So maybe we do talk about objectives a lot, but clearly defining these and working towards them really can lead to greater financial success.
