A Comprehensive Guide to Goals-Based Financial Planning

Goals-based financial planning is more than just assembling an investment portfolio and picking investments expected to outperform their alternatives.

An easy way to know more about goals-based financial planning is to compare it to building construction. Just as an architect would draft blueprints tailored to the specific purpose and requirements of a building, goals-based planning involves identifying specific financial goals that you want to achieve during your multiple timelines and determining how you will pursue these goals.  

It’s important to note, goals–based financial planning is not a one-and-done type of activity. It should be an adaptive process between you and a fiduciary financial advisor.  Your financial plan should be able to address both the “expected” and “unexpected” events that can occur during your financial life.  

As Chicago-based wealth managers, we specialize in helping affluent individuals and their families create goals-based financial plans that are realistic and focused on what matters most to them and their families.  

Our Quick Guide will cover the following topics that are related to the successful application of goals-based financial planning:

Chapter 1: Is There a Difference Between Financial Planning and Goals-Based Financial Planning?

Chapter 2: The Role of a Fee-Only Fiduciary Financial Advisor

Chapter 3: Understanding SMART Financial Goals 

Chapter 4: Maximizing Your Charitable Contributions with Tax-Efficient Strategies

Chapter 5: How to Align Your Investments with Your Values

Chapter 6: The Value of Cogent Conversations in Wealth Management

The mindset you need to create wealth differs greatly from that of growing and then preserving your wealth.
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Chapter 1

Is There a Difference Between Financial Planning and Goals-Based Financial Planning?

Yes, there are significant differences between financial planning and goals-based financial planning. 

Traditional financial planning covers various aspects of your life, including budgeting, saving, investing, taxes, retirement, and estate planning. We go even further.

Goals-based financial planning focuses on achieving specific life objectives through various financial strategies and disciplines. It involves identifying and prioritizing distinct life goals – like buying a second home, funding education for children, or planning for retirement years that could last as long as working years.

Goals-based planning frequently includes setting measurable time frames and target amounts for each goal, and it might involve more detailed, goal-specific strategies compared to broader financial planning topics.

“To achieve what 1% of the world’s population has, you must be willing to do what only 1% dare to do. Hard work and perseverance of the highest order.”― Manoj Arora
Chapter 2

The Role of a Fee-Only Fiduciary Financial Advisor

In simple terms, a fiduciary is a person who holds a position of trust. In this case, you trust your financial advisor always to do what is best for you, being morally and legally motivated to do so. Being a financial fiduciary is the highest ethical standard in the financial services industry. Advisors who perform their duties under the pursuant to the Investment Advisors Act of 1940, a fiduciary advisor is bound by the highest legal duty of care for your financial welfare. Their advice must always be in your best interests. They must always put their client’s financial interests ahead of their own. On the flip side of this coin, it is also important to note some financial advisors are not held to the financial fiduciary standard. When the advice is considered secondary to a broker’s or agent’s primary transactional based duties, the advice must be suitable for you, but it’s allowable if it is influenced by underlying interests in promoting one product over another – even if the recommended product is not in your best interests. It is important to know the difference when you select a financial advisor.   This means advisors who work in a Registered Investment Advisory firm are compelled to provide financial advice and services that always benefit you, not themselves or their firms - whether planning, investment, tax advice, or risk management.  We seek transparency above all else. As fiduciaries, our Cogent Strategic Wealth advisors not only personally pledge to put your needs first at all times but also embrace our legal obligation to do so. We’re fee-only advisors who are dedicated and even obsessed with helping our clients realize their life and wealth goals. No brokers. No commissions. Just sound advice with your best interests at heart.

Learn more about our three-step strategic approach to wealth management.

Chapter 3

Understanding SMART Financial Goals

When thinking about creating your financial goals, having some prudent framework around them is of utmost importance. Ask yourself if the goals you’re setting are realistic and achievable. Are you comfortable taking the risk it takes to achieve your goals? There’s nothing worse than staying awake at night worrying about the achievement of your most important financial goals.  

That’s why we recommend using the SMART format when setting your financial expectations and goals:

Specific (S): Define your financial goals with clarity. For instance, instead of a vague goal like "save money," specify it as "save $300,000 for the down payment on a second home in the mountains.”

Measurable (M): Create measurable goals so you can track your progress and know when you've achieved them. For example, "pay off $100,000 in business school debt" is a measurable goal.

Achievable (A): Ensure your goals are realistic and attainable within your current financial circumstances. You don’t want to be frustrated by goals that aren’t achievable. 

Relevant (R): Ensure your goals align with your working and retirement plans. All relevant goals should contribute to your financial well-being.

Time-Bound (T): Set a deadline for each goal. For example, "save $75,000 for a world cruise in the year that you retire away from full-time work.

At Cogent, we use evidence-driven insights to help you create your financial plan for accumulating, preserving, and distributing your assets. We do not believe in using guesswork more than you would for a plan of this importance. We believe in the power of collaboration and sharing insightful information with our clients based on decades of experience. 

Chapter 4

Maximizing Your Charitable Contributions with Tax-Efficient Strategies

Many clients believe charitable giving is an important part of their financial plans. Philanthropy among high-achieving households is a reflection of their personal hopes, beliefs, and values. Our role is to help them achieve their goals of driving positive change now and for future generations while also optimizing tax strategies simultaneously. Charitable contributions are a way to support organizations and causes that you believe in: Your university, a hospital, your religious organization, or groups that foster the well-being of others.

As someone who has accumulated substantial wealth, having a structured charitable giving strategy can touch lives while also creating substantial tax benefits by reducing your taxable income. This benefits the charitable organizations you choose to support and reduces your tax burden.

In addition to tax benefits, a well-thought-out charitable giving strategy can help you transfer more wealth to your heirs and not less. Using charitable donation strategies, you can pass wealth to future generations by reducing your taxable estate, thereby preserving your wealth and legacy.

For example, consider a financial scenario where you establish a family Donor Advised Fund. Regularly contributing to this charitable entity supports your charitable causes and creates an efficient structure for transferring wealth. The donor-advised fund can continue to support charitable initiatives even after your passing, with family members stepping in to ensure a lasting legacy for your family.

By contributing an asset to a fund that grows, you can expand the magnitude of your gift for years or even future generations of your family. This could set the stage for your descendants to continue your family tradition of supporting the institutions important to you and your family. 

At Cogent Strategic Wealth, our strategies for charitable donations are designed to elevate the impact of your donations, ensuring more reaches your beneficiaries. We also strive to cut down or completely avoid capital gains taxes on highly appreciated assets while also creating charitable deductions against your income. The bottom line is that you enrich lives by turning charitable giving into a significant and enduring family endeavor.

Chapter 5

How to Align Your Investments with Your Values

A growing trend in investing is pairing your values with the investments that you make. Whether you are investing based on investing in businesses that demonstrate their commitment toward improving upon environmental, social, and governance-related initiatives (ESG Investing), there are many ways in which you can make a difference based on your investments. A carefully selected ESG strategy can help investors align their investments with deeply held personal values.

Chapter 6

The Value of Cogent Conversations in Wealth Management

As business owners, we share the same zest and resolve for life that you do. We also recognize that success has a unique meaning for each individual and their families. This understanding drives our Design | Build | Protect® strategic approach to financial planning and investment management.

Design: We meet with you in our “discovery” phase to better understand your circumstances, concerns, and goals. We believe these initial meetings allow us to get to know one another by asking the right questions and listening to responses. 

Build: This is our “construction” phase, where financial planning begins. It starts with our extensive research, where we apply evidence-driven strategies to your financial situation to create a holistic plan that identifies opportunities to bring sound investment fundamentals to your specific situation and unique life goals. We also use evidence-driven approaches to seek tax minimization options, insurance gaps, and charitable giving practices.

Protect: This is day-to-day management where we help you stay on track using continual analysis, advice, and information sharing. We implement tax minimization strategies while optimizing your investment growth, focusing on limiting your risk exposure in the securities markets. 

Meanwhile, you gain a partner who continually provides the information you need to feel comfortable about economic and market events that impact your financial well-being.

Success should be a reward - not an obstacle

Your ambitions and struggles are unique, so our wealth solutions go beyond the conventional – they reflect your needs and wants.