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Wealth Advisory & Planning

April 24, 2018

Goals-based Wealth Review: An Integrated Approach to Wealth Management

Aligning an investor’s wealth objectives with an investment strategy is the foundation for successful personal wealth management. In recent years, the techniques and technology used to make planning and investment decisions have evolved dramatically. Glenmede has leveraged these developments through a dynamic process, the Goals-based Wealth Review.

A UNIFIED PLANNING APPROACH

Unlike traditional approaches that treat wealth planning and investment management as separate processes, the Goals-based Wealth Review integrates all areas of our expertise in a unified planning approach. Experience shows that when clients and their Relationship Managers consider wealth objectives and investment options in tandem, it yields deeper insights and empowers clients to make better, more informed choices. The result is that clients have greater confidence that their wealth plan will allow them to realize their long-term spending, gift and estate, and philanthropic goals. We recommend clients use the Goals-based Wealth Review when developing an initial investment policy statement and wealth plan, and whenever their life circumstances or wealth goals change.

A FIVE-STEP FRAMEWORK

Through in-depth discussions with their Relationship Managers, clients evaluate their wealth objectives and investment options—aided by data that helps to quantify and visualize their choices across multiple scenarios—until their wealth goals and investment strategy align with a high probability of success.The Goals-based Wealth Review unfolds over a series of five steps, outlined below, each of which leads to more nuanced conversations about how a client’s goals and risk tolerance affect the probability of achieving lifelong income and asset sufficiency.

1. Create a personal balance sheet.

The first step is to create a personal balance sheet that establishes a clear picture of the current assets, liabilities and net worth. Clients who prefer a guided approach can work with their Relationship Managers to develop their balance sheet, while others may choose to get started on their own using WealthView, our online personal financial management tool. WealthView accommodates all types of assets, including those managed outside of Glenmede, such as savings plans, private equity, bank accounts and real estate. It can also incorporate liabilities, including mortgages and future taxes on deferred compensation.

2. Create or update personal wealth objectives.

Setting long-term goals can be the most challenging part of the process. Most of us do not plan decades in advance and tend to focus instead on life’s immediate opportunities and challenges. Relationship Managers help clients to think through the passions they want to fulfill during their lifetime and the values they want to transfer to future generations. These wealth objectives are then quantified as future spending needs and assets intended for loved ones and charitable interests.

The result of this process is a summary document that serves as a touchstone for future discussions. Life is never static, and as personal circumstances change, so too may clients’ wealth objectives.

3. Assess the probability of meeting goals.

Once the personal balance sheet has been created and the wealth objectives documented, Relationship Managers use that data to determine whether a client’s current assets and future income will be sufficient. Glenmede models the future state of the client’s cash flows, taxes, assets and liabilities using two methods to assess the probability of the client achieving success, which Glenmede defines as having enough money to meet lifetime goals. The first model assumes the client’s invested assets earn “normal” future market returns. This allows the client to see how much money they and their heirs could have over time.

Since market returns are rarely normal, Glenmede uses a second model that projects return assumptions for a wide range of market environments—good, bad and everything in between. This analysis quantifies the probability that the client’s wealth plan will deliver future income and meet their legacy and philanthropic goals. A probability of 85 percent or above is a strong indicator of future success.

4. If the probability is too low, evaluate alternative planning and investment options.

What happens if the initial projections fall below the 85 percent threshold? In that case, the client and their Relationship Manager will refine the client’s goals and evaluate different investing or wealth planning strategies—all with an eye toward arriving at a new wealth plan that raises their probability of success to at least 85 percent. In those conversations, the client may decide to revise their spending plans, alter their investment allocation and/or consider using different legacy or philanthropic planning techniques. In theory, each of these variables can be thought of as a “lever” that a client can adjust to raise their probability of success. In reality, however, clients typically grapple with several variables simultaneously. For example, they might want to see what would happen if they decreased their spending, increased a legacy gift and were willing to take on slightly more risk in their investment portfolio. This is where the Goals-based Wealth Review process makes a complicated process relatively simple.

Our sophisticated technology quickly assesses multiple scenarios and illustrates how different wealth planning choices interact with investment decisions and affect the probabilities for success. This data fuels more questions and discussion between the client and their Relationship Manager, as they refine and test alternative investment and wealth planning strategies. The process continues until the client is confident they have developed a wealth plan that aligns with their risk tolerance and long-term objectives, and has an 85 percent or above probability of achieving their goals.

5. If the probability is too high, consider more ambitious goals.

What happens if the initial projection shows an extremely high probability of a client achieving their goals? In that case, discussions will focus on how the client might consider loftier goals and a more ambitious approach. This might include spending more money on personal interests, moving assets from an estate at an earlier age or making more sizable gifts to a charity within their lifetime. Even if a client is content with the original objectives, it is useful to understand just how attainable a new dream might be.

KNOWLEDGE IS POWER

A Goals-based Wealth Review helps clients visualize the complex relationship between their goals, investments, risk and wealth planning alternatives across different scenarios. The result is the confidence and peace of mind that comes from an investment policy statement and wealth plan designed to support a set of goals long into the future.

 

This material is intended to be a review of issues or topics of possible interest to Glenmede Trust Company clients and friends and it is not personalized investment, estate planning, tax or legal advice. Advice is provided in light of a client’s applicable circumstances and may differ substantially from this presentation. This material may contain Glenmede’s opinions, which may change without notice after date of publication. Information gathered from third-party sources is assumed reliable but is not guaranteed. This publication may not be used as legal or tax advice.