Strategies for Balancing Comfort and Goals
Our Goal Projector illustrates what’s possible in as little as 15 seconds and with just four inputs. Once you know what’s possible for your client, you can collaboratively explore the three points of the risk profile triangle (Risk Comfort, Risk Required, and Risk Capacity) and instil confidence that you’re designing a personalised plan for their success.
In this article, we explain collaborating with a client to balance Risk Comfort and Goal Achievability, and using these insights to create a personalised plan that lands the first time, every time.
📄 Download the comprehensive guide for understanding our insights here.
Strategies for balancing Risk Comfort with Goal Achievability
On the Goal Projector screens, you may encounter the following scenario where a client's Risk Comfort Match portfolio differs from their Goal Match portfolio recommendation. The Growth portfolio makes them enough money in their sleep, but the Balanced portfolio gets them the most sleep at night.
In the above scenario, the client’s Risk Comfort Match is the Balanced portfolio. Using your capital market assumptions, we’ve modelled that the Balanced portfolio is not going to achieve their goal with 70% probability or higher.
However, the Growth portfolio is going to achieve their goal with 70% probability or higher. The Growth portfolio is their Goal Match because it is the least risk they can take while still achieving their desired goal with 70% probability.
To learn how we calculate goal achievability for each of the portfolios, check out this article.
Discussing which portfolio is most suitable
The client’s plan is not on track in the Balanced portfolio above and requires a change. This is where you, as their adviser, can pull the advice levers (read: goal details, ongoing contributions, and risk level) and help them to explore the three points of the risk profile triangle to make a suitable portfolio selection.
💬 Navigating client conversations: A Comfort Gap
- Explain the options: (1) Adjust the goal to become more achievable, (2) Adjust their contribution to make the target goal more achievable, (3) Sacrifice some Risk Comfort to make the goal more achievable.
- Demonstrate how making small changes to their contribution or goal can have a significant impact on the overall achievability.
- Discuss which of these options, or what blend of these options, is the best strategy for the client and their financial goal.
Create personalised plans that get it right the first time
Perhaps your client decides to increase the annual investment contribution and reduce their target income in order to achieve the goal by the expected withdrawal date without sacrificing Risk Comfort.
By increasing the annual investment amount from $30,000 to $35,000 and adjusting the retirement income goal the Balanced portfolio is now both the Risk Comfort and Goal Match. This means you have now balanced their Risk Comfort with their Goal so that they can have confidence they are on track while remaining comfortable with the amount of risk they are taking.
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