Goals-based Wealth Review
October 23, 2017
At Glenmede, we believe that clients should lay a foundation for their investments and wealth planning through a goals-based wealth review. In these discussions, we review your short- and long-term goals and consider whether your current investment and planning approaches continue to support your goals. That process includes sophisticated probability analyses across a range of scenarios to assess the likelihood of achieving your objectives. Depending on the outcome, this may lead to a discussion of alternate investment and planning solutions — either to correct funding shortfalls or, if the projections for goal attainment are high, to consider new or more ambitious goals. To illustrate this process, we have shown a simplified example using the family of John and Jane Glenmede.
STEP 1: Develop a personal balance sheet
Glenmede clients can create their personal balance sheet in partnership with their Relationship team or by going online and using Glenmede’s WealthView technology. WealthView provides access to a balance sheet which can accommodate all types of assets, including those managed outside of Glenmede such as savings plans, deferred compensation, private company equity, checking accounts, real estate and other asset accounts. This software can dynamically update prices and amounts through online connections. It can also estimate the liabilities, including home mortgages, and future taxes on deferred compensation.
STEP 2: Setting wealth goals and objectives
Setting personal goals may be the most challenging part of the planning process. We recommend a steady and iterative process where your Glenmede team can be an instrumental part of recording and helping you think through your goals. We often start by writing a short summary of your goals for personal spending, legacy gifts and charitable causes. This memorializes your intentions in a document that is reviewed and edited annually or as circumstances and goals change.
STEP 3: Assess the probability of success based on your current investment and planning strategies
The question now becomes whether your current assets and future income will sufficiently meet your personal spending, legacy and philanthropy goals. There are two ways to assess the probability of achieving success. First, we project the future spending using the assumptions from a client’s Client Wealth Objectives and Glenmede’s estimates for future asset returns and inflation, which assume normal (median) market returns. Our models allow us to gauge how much money will remain when a client reaches the age of 95.
Unfortunately, markets don’t travel in straight lines, and even with a long-term time horizon a client may earn more or less than our long-run forecasted returns. Hence, we perform a second analysis, where we make forecasts for good markets, bad markets and everything in between. The probability of success is derived from this analysis and is an estimate of the likelihood of having enough money to meet all defined goals and not run out of money by age 95. Generally, we like to see a probability of success of 85 percent or higher when devising plans.
STEP 4: If the probability of success is low, consider investment and planning alternatives
If the projections show a less than 85 percent likelihood a client will meet their goals at age 95 and run out of money, Glenmede will work with you and, potentially, recommend changes in your wealth and investment planning strategy. There are a number of levers available that a client can use to raise their probability of success including changing spending plans, asset allocation and philanthropic and estate planning strategies.
STEP 5: If probability of success is high, consider more defined or ambitious goals
It is quite possible that when we compute your analysis, the projections will show a 95 percent or greater probability of goal achievement. In that case, you could probably afford to set higher goals or more defined goals. This might include spending more money on personal interests during your lifetime, moving assets from your estate at an earlier age or making more sizable gifts to a charity within your lifetime. Even if you decide not to commit to any particular goal, it is worth running the numbers to know the attainability of these goals and in the process, potentially realize a more fulfilling set of dreams.
Regardless of the path you choose, your Glenmede Relationship team is prepared to work with you and your advisors to navigate the different choices and alternatives.
This writing is intended to be an unconstrained review of matters of possible interest to Glenmede Trust Company clients and friends and is not intended as personalized investment advice. Advice is provided in light of a client’s applicable circumstances and may differ substantially from this presentation. Glenmede’s affiliate, Glenmede Investment Management LP, may conduct certain research and offer products discussed herein. Opinions or projections herein are based on information available at the time of publication and may change thereafter. Information gathered from other sources is assumed to be reliable, but accuracy is not guaranteed. Outcomes (including performance) may differ materially from expectations herein due to various risks and uncertainties. Any reference to risk management or risk control does not imply that risk can be eliminated. All investments have risk. Clients are encouraged to discuss the applicability of any matter discussed herein with their Glenmede representative.
Nothing herein is intended as legal advice or federal tax advice, and any references to taxes which may be contained in this communication are not intended to and cannot be used for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promotion, marketing or recommending to another party any transaction or matter addressed herein. You should consult your attorney regarding legal matters, as the law varies depending on facts and circumstances.