Goal based planning goes mainstream. Are you prepared?

For more than a year now, the goal-based planning approach to investing has been steadily gaining traction. Numerous apps such as Kuvera, Wealthy, Fisdom, Fundsindia, and Goalwise have this as a core feature in their offerings. The latest entrant in this space, Paytm money too has goal planning as an integral part of the application.

Print and digital media too have been very vocal about this concept.

It’s clear — goal-based planning has gone mainstream. Expect your clients to tell you or nudge you to offer similar services!

Now, what is it that makes goal-based planning tick with the investor community at large? Let’s dig in

• Whether you ask them or not, investors are inherently investing with some goals in mind. So, a goal-based planning approach is something they can actually relate to.
• Secondly, goal-tracking tools (technology) didn’t exist until 2–3 years back. It is only in the last few years that things have started to fall into place.
• Goal calculators are different from goal trackers. Lots of websites have goal calculators. You’ve probably relied on an Excel sheet too to show how much your clients need to save for specific goals. But then the story ends there. It never gets recorded for future reference. While a goal tracker is something that the client can refer to in the future too. It tells them whether they are on track or not, whether they need to save more. This nudges them to save more. It’s always a healthy way to upsell. A quick excel calculation or a one-off calculator will never be as effective.

But what’s missing in the current apps?

Most of these tools currently are basic in nature when it comes to goal-based planning. The Main reason is that these are for the DIY (do-it-yourself audience). So, to be fair, it may not make sense to make it too complex.

But then, it loses its impact. Let me explain — Most of these apps are only about investing in mutual funds. So it allows the investors to link only their mutual fund portfolios. The apps are essentially neglecting a very important portfolio, which currently (typically) takes over 90% of the pie e.g. insurance policies, FDs, stocks, post office schemes, PPF, EPF, etc.

For instance, you should look at apps that allow you to link all assets to goals. This gives a more realistic picture.

Should you offer goal-based planning too?

• Similar service, if offered, 2–3 years back might have had an average response. But with the traction goal-based planning is now gaining, it makes perfect sense to include it in your portfolio of service offerings
• Your customers can relate to it. Any individual who has a shortfall and is investing towards reaching a certain corpus (for some specific needs) will be able to relate to the service offering.
• You no longer need to rely only on excel sheets to offer such a service. For instance, you can use goal planning, tracking, and review tools with what-if analysis. This helps you quickly do comprehensive planning and also ensures you can use it for ongoing tracking and review.
• With reducing TER and, as a result, a reduction in commissions, it is better to diversify your offerings and start building a parallel offering that can generate revenues. You may not be successful from day one. But if you persist, probably a year down the line, you would have built a cushion for yourself.
• It is an essential first step towards building a fee based practice. We have seen lots of distributors venture into this service offering. I see, IFAs from tier 2 and tier 3 towns too offering such services. You do not need to do deep cash flow analysis, financial planning, etc. Just start with basic goal calculation and linking assets to the goal. That in itself can be a great value add to your clients.
• When your clients understand the concept, it will lead to more sticky assets. You will see lesser redemptions and lesser churn.
• It helps you shift the focus away from generating the highest returns to saving more.

Finally, in my view, these are early days but the trend indicates it is here to stay. After all, it is fundamentally a robust concept and with time we will have a wider application.