Sedona Arizona

Financial goals vs financial direction

One of the most common questions advisors ask prospective clients is: “what are your financial goals?”

Financial services firms market a goal-centric approach to the general public. With this question, advisors are communicating that you need to have specific and well-defined financial goals in order to get somewhere. Let’s explore this concept and decide if it’s better to have a financial goal or a financial direction.

Setting a goal

My family occasionally makes the short drive over to southern California to visit family. When we start the trip, the goal is to reach a specific place in southern California within about 5-6 hours time. That’s a specific and well-defined goal. It’s even a SMART goal, as it is Specific, Measurable, Achievable, Relevant, and Time-bound.

I have a goal, now what?

I’m going to put my goal — to arrive at a specific place in southern California within about 5-6 hours time — in motion. Once the gas tank is full and the tire pressure is checked, I’ll hop on the interstate and go west. That should work, right?


Setting a direction

Accidents often leave debris that blocks travel lanes. The occasional sudden change in weather conditions could make traveling more difficult. We could have a flat tire. The next gas station could be closed. Road construction could mean stopped or re-routed traffic.

Things happen along the way that are not part of the plan. The unexpected should be expected. The problem is, we don’t know where the unexpected might show up.

When faced with the unexpected, we have to adjust our expectations and our directions. There may be a better alternate route. Maybe it takes longer to get there, and maybe we have to go a different direction before continuing west. I might have to drive slower through a few parts and the route may be very unfamiliar.

Behavioral shifts

One of the less talked about factors in implementing and adjusting plans is the behavioral shifts that may be required. Going back to the traveling west analogy, if I am used to driving 80mph on the open highway, I will have to shift my behavior in heavy traffic. Not doing so would cause a lot of damage and completely risk my ability to ever reach the intended destination.

Understanding behavior and why people make certain choices is a crucial part of the advice relationship. In my years of doing this work, I have noticed how tightly our identity and comfort are wrapped into whether or not behavioral shifts are reasonable or even possible.

If you have an idea about how you see yourself and your life in 5-10 years, you will begin to wrap an expectation and an identity around that vision. Any advice I give that takes you a different direction than you foresee may slowly start to trigger a fight or flight response. You may then avoid implementing the advice. As the advisor, I will be left wondering why you aren’t doing the thing that I know is right for you.

This scenario plays out all the time between advisors and clients. Lots of books, podcast episodes, and training materials have been written to help advisors be more convincing. More compelling. More persuasive.

It’s not about persuasion

Reality check? All I need to do as the advisor is seek to understand the vision you see. Then, I can explore why that particular identity association is important to you. Now we can test whether the goal you have in mind is right-sized for you. Then, we work together to define the right direction, one you are more willing to go.

Why? Because rather than posing a threat to your identity, I have helped you shape it. Now we can begin working on the necessary behavioral shifts. You will be more likely to reach the intended destination (goal) when we are collaborating on the direction.

Financial goals with financial direction

Setting goals can be an important part of your wealth management plan. At the same time, the goal alone is worthless without doing the work to understand where you’re going, how you might get there, and being comfortable with having to make unexpected adjustments along the way.

Maybe the right question isn’t whether to have financial goals vs financial direction. Maybe the better consideration is: are you setting financial goals because someone on an advertisement says you should, not knowing if that goal is right-sized for you? Or, are you setting goals that can be moved toward with a well-defined financial direction?

The difference may be subtle, or even seem like semantics to some; however, I believe the difference is a potentially wide gap in the financial advice many are receiving.

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Author: Dale Shafer II, CFP®, APMA®, CDFA®

The National Association of Personal Financial Advisors
The Society of Advice

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