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Northern Trust Develops Goals Driven Investing Approach

Reflecting desires of wealthy individuals to focus more explicitly on meeting specific life goals, Northern Trust has introduced a purposeful, proprietary approach to goals-based investing. This method, which represents an evolution in the way assets are managed to achieve clients’ goals, aims to align specific assets to stated objectives.

Traditionally, investment advisors evaluate a client’s risk tolerance and time horizon and map them to an asset allocation model. While Northern Trust continues to provide these services, our approach focuses first on a thorough review of client goals, such as buying a second home or setting up a charitable foundation. Then we develop a distinct mix of investments appropriate for reaching each goal.

“We’re focused on helping our clients achieve their goals in life,” said Jana Schreuder, Northern Trust’s President of Wealth Management. “We tailor a client’s investment program by matching assets with goals. This allows our clients to better understand how their investment strategies and wealth relate to their future needs and aspirations.”

Northern Trust’s recent Wealth in America Survey, which provides insights into the financial attitudes of wealthy Americans, revealed some inconsistencies around goals. It found that:

  • 81 percent of high net-worth individuals (with investable assets of $5 million or more) say that financial planning should encompass life goals, yet only 11 percent have established a financial plan as a step toward achieving their goals.
  • High-net-worth couples are nearly twice as likely to discuss vacation plans than to talk about financial goals.
  • Most high-net-worth investors are willing to sacrifice potential return if doing so increases the certainty of funding their goals.

Goals Driven Investing at Northern Trust involves collaboration between clients and their advisory teams around identifying and quantifying both life goals and financial assets, including real and human capital. Advisors use innovative and proprietary technology that takes multiple inputs about future goals, applies a set of dynamic discount rates to determine their present values, assigns those values against each client's assets and constructs customized investment strategies aligned with each goal. The process gives clients a higher degree of confidence in their financial future by enabling them to understand whether their assets are sufficient to fund their goals, as well as providing a framework for addressing any excesses or shortfalls.

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