How to Set Financial Goals

Everyone has behavioural biases, and these biases pop up when we set financial goals because of emotions, complexity and the difficulty of forecasting our future

Ray Sin 14 December, 2018 | 12:19PM

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Goals-based financial planning is here to stay, and for good reason. Using a goals-based framework in financial planning led to an increase in investor wealth of more than 15%, according to research by David Blanchett, Morningstar’s head of retirement research. Beyond returns, investors get a sense of motivation and satisfaction with their financial plans when advisors focus on a client’s personal goals versus arbitrary benchmarks.

But for goals-based planning to succeed, investors need goals that are important and achievable. Just asking investors what their goals are isn’t the solution. Investors might respond with answers that are seemingly reasonable, but research indicates many of these on-the-spot statements reflect top-of-mind priorities that might not represent the goals that are truly important to them.

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About Author

Ray Sin  

is a behavioural scientist with Morningstar

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