In our previous blog post, we discussed how to set yourself up for a successful first meeting with a financial advisor, and how to be sure you’re choosing the right one. The next step in this decision-making process is to ensure your planner knows how to get you to where you want to be, and that’s where a second meeting is crucial.
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Many people think the terms ‘financial goals’ and ‘financial objectives’ are interchangeable. Most investors come into their meetings with their financial planner – especially their first few meetings – and spend the majority of their time together talking about goals. Retirement goals. Savings goals. Lifestyle Goals. While goals are a key part of the process, where is the talk about objectives? The two terms are not the same. And great financial planners know the difference.
Simply put, goals without objectives cannot be accomplished. Objectives without goals may result in you never getting where you want to go. The main difference can best be explained in their level of concreteness. Objectives are concrete, whereas goals are less so. Goals are about the ultimate journey and the destination, not just the checkpoints along the way. A plan without concrete objectives will often miss the mark. Why? Because there is no mark.
The results you achieve with your financial plan depend on knowing the difference between your objectives and your goals. You may have a goal to have sufficient funds to send your children to great Universities, but without specific objectives to hit along the way, you are unlikely to move in the right direction, and at the right pace. You won’t have milestones to measure against that will help you identify if you’re where you need to be at any given point in time.
An objective is something tangible – something measurable – something you can hold in your hand. This tangibility provides a great deal of clarity and helps you see whether you’ve hit the mark. If your goal is to afford to send your kids to University, you won’t know whether you’ve achieved it until they’re 17 or 18. That leaves a lot of room for guesswork and uncertainty between now and then. But if you set specific objectives to hit along the way, you’ll be able to measure your progress at each stage and feel a much stronger sense of certainty about whether that goal will be met.
Before you make a final decision about whether to work with a prospective financial planner, set up a second meeting. Revisit the goals you spoke about in your first meeting, and ensure the planner truly understood what your goals are. Once they’ve done that, it is then time for them to show their level of expertise by helping you set objectives.
Let’s explore a more detailed example. Perhaps you told the planner in your first meeting that you want to ‘retire comfortably’. That’s your goal. The planner should then work with you to clarify what ‘comfortably’ really means to you. They need to ask questions to quantify what your level of comfort requires. This may result in you identifying that you need to retire on an after-tax, inflation-adjusted income of $60,000/year. This objective can now be measured and a retirement income plan can be created to determine if this is an attainable goal.
So when you head into that second meeting with a financial planner to determine whether they’re the right one for you to be working with, be sure you look for their understanding of the differences between goals and objectives, and that they are able to help you identify both.
To hear my free podcast on this topic, please visit the The Key To Retirement Podcast and listen today.
