For many investment advisers, their process is hyper focused on investing at the expense of planning. However, a better approach is to start by defining what success means for an investor, and then align strategies and portfolio decisions to those desired outcomes.
“A planning-led approach ensures the portfolio’s role is clearly defined around funding lifestyle, cash flow goals, supporting legacy intentions and enabling charitable impact, all in a coordinated way,” says Robert M. Siewert, Portfolio Management Practice Leader and Managing Director at Glenmede.
Smart Business spoke with Siewert about the advantages of a planning-led approach and why building a portfolio without a roadmap can lead to misaligned outcomes.
What is a planning-led approach?
The planning-led process begins by defining exactly what success looks like for the investor and then aligning every subsequent planning strategy and portfolio decision to those specific outcomes. While an investment-led approach starts with where to put the money today, a planning-led approach asks what is the goal of the portfolio for the investor. This ensures the portfolio is clearly defined around lifestyle needs, cash flow requirements, legacy intentions and charitable goals, connecting every investment decision to the individual’s real-life goals and time horizons.
A planning-led approach also brings a level of discipline and flexibility to the decision-making process. By turning abstract life goals into clear financial priorities, an individual gains the confidence to stay invested during periods of high volatility. For example, during times of geopolitical uncertainty or market downturns, an investor who has prioritized planning is less likely to make short-term, emotional, suboptimal decisions. This perspective shifts the focus away from the noise of the daily market and toward long-term achievement.
Why start with a plan well before a liquidity event?
For most business owners, their company is their largest asset, but it is also an illiquid one. Planning early allows advisers to shape their decision-making while the owner still has the most flexibility and optionality. It enables an investment adviser to model downside scenarios and help an owner understand their future liquidity needs.
Without early planning, owners often ‘exit into’ a portfolio without a fully designed strategy for the new liquidity, taxes and lifestyle needs, in addition to legacy planning. Early planning provides the structured strategy necessary to transition with confidence from business ownership into their next chapter.
What questions should an investor ask to determine if a firm prioritizes planning?
Start by asking the investment adviser what they take into consideration when determining how to invest capital. If the conversation begins with a discussion about risk tolerance and portfolio construction, it is a sign that decisions are being made without a full understanding of what the money needs to do. Risk tolerance alone does not explain whether the assets are meant for near-term cash flow, a family legacy or charitable giving. Without a plan, a portfolio is essentially built in a vacuum. This often leads to misaligned allocations and behavioral mistakes when market volatility increases. A portfolio might look appropriate on a spreadsheet, but it can still fall short of meeting the actual outcomes the investor requires.
The most important realization is that the planning process is more important than the specific investment decisions made within the portfolio. When a plan is in place and regularly revisited, the portfolio becomes purpose-built. It increases the likelihood of achieving confidence in future cash flow and legacy.
Planning should be the lens through which every investment decision is made. When goals are clearly defined and monitored, planning defines the purpose of the portfolio — so investment decisions are always anchored to outcomes, not just markets. ●
This article presents general information and is not intended to be financial, investment, tax, legal or other advice. It contains information and opinions which may change after publication. Views expressed herein do not necessarily reflect the views of the author’s employer. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Readers should consult with their own financial, tax, legal or other advisors to seek advice on their individual circumstances.
INSIGHTS Wealth Management is brought to you by Glenmede.
